(Sept 2): India’s shadow lenders are set to raise at least 100 billion rupees (US$1.1 billion or RM4.26 billion) through the issuance of local-currency bonds as early as next week, according to people familiar with the matter, as they race to lock in borrowing costs before they rise further.
State-run Power Finance Corp is seeking bids on Thursday for a two-part bond issuance to raise as much as 50 billion rupees, after raising 25 billion rupees via 15-year notes last week, the people said, asking not to be identified discussing private matters.
Bajaj Housing Finance Ltd, a unit of top financier Bajaj Finance Ltd, is planning to raise as much as 20 billion rupees, while HDFC Bank Ltd’s arm HDB Financial Services Ltd is planning to issue at least 10 billion rupees worth of notes. Tata Capital Ltd is planning to borrow at least 15 billion rupees, and Shriram Finance Ltd, the nation’s biggest vehicle financier, is planning an over five-billion rupee offering.
Non-bank lenders are the biggest issuers of local-currency bonds in India and they’re rushing to raise funds as borrowing costs globally and at home increase. A strong bond pipeline would boost rupee-denominated issuance that’s down about 13% so far this year to 8.7 trillion rupees, according to data compiled by Bloomberg.
Inflation risks brought on by rising oil prices have boosted expectations that the Federal Reserve will raise rates. Faster than expected economic growth in India has also bolstered the chances of interest-rate increases later this year.
The average yield on top-rated two-year and five-year corporate bonds issued by shadow lenders rose to 7.98% and 8.09%, respectively on Tuesday, the highest level in nearly three months, according to data compiled by Bloomberg. The three-year counterpart climbed 26 basis points last week, the most for a five-day period since the week ended May 22.
“Issuers are lining up in the bond market as interest rates are set to rise,” said Soumyajit Niyogi, director at India Ratings, a local unit of Fitch Ratings. “The demand for funds from non-bank firms has increased also as they build liquidity to meet credit demand ahead of the festive season.”
The Reserve Bank of India held its benchmark rate at 5.25% in August, though policymakers have signalled that a hike may be needed if price pressures build. Citigroup expects 50-75 basis points in increases in the key rate between October and March.
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