Bond issuers seek better pricing after RBI's rate cut, rethink offers

MUMBAI: The latest rate cut by the central bank has made bond issuers more ambitious as they seek better pricing. At least three state-owned issuers have scrapped or delayed issuances in the last one week toward this end. Triple A-rated Indian Railways Finance Corp (IRFC) was planning to raise Rs 2,500-3,500 crore, for which it had called for bids a few days ago. Issue arrangers bid at around 8.38% for 25-month bonds, but the issuer was ready to offer nine basis points lower at 8.27%.

IRFC then called off the issue and is said to be revising the issue structure before embarking on a fresh fund-raising bid. “IRFC is still talking with arrangers. They may now offer bonds with three-to-five year maturities as that segment will attract overseas investors,” a person familiar with the matter told ET. ET had reported earlier that IRFC would raise up to Rs 4,000 crore by selling bonds before the financial year ends.

But an official from the largest insurer said it has no headroom left for buying IDBI Bank infra bonds. It’s not been approached regarding IRFC debt. State Bank of Bikaner & Jaipur (SBBJ) is believed to have sold bonds worth Rs 250 crore directly to LIC after talks with arrangers failed. SBBJ was asking for a better price on 10-year tier-II bonds with a majority of arrangers bidding around 8.45%.



"The rate-cut factor is is already priced in the market,” said Ajay Manglunia, head of fixed income at Edelweiss Financial Services. “Investment appetite is also low in the market as most investors have reached up to (individual) limit at the financial year end.” Power Finance Corporation also scrapped five-year bond sales after it sought an 8.23% rate compared with 8.27% bid by arrangers. It eventually raised Rs 1,000 crore at 8.29% at a 3.2-year maturity