Fund raised through commercial papers rose sharply around 60 per cent month-on-month to Rs 1.51 lakh crore in August due to large issuances by some companies. This was even after the rates on these instruments have risen more than 25 basis points throughout the month.
According to the Prime database, companies raised Rs 1.51 lakh crore in August, as compared to Rs 94,599 crore in July. With this, fundraising in August is highest in the current financial year.
There are some regular issuers like oil marketing companies, National Bank for Agriculture and Rural Development, Export Import Bank of India, SIDBI, which usually raise funds for their working capital needs and funding needs, helped to sharp rise in issuances in the month.
“During the month of August, there was an installment due of approximately Rs 17,870 crore to the Department of Telecommunications, Government of India from Indian Telecom operators towards 5G Spectrum payment. Hence, in addition to the regular borrowing, we have witnessed Bharti group, Reliance Jio have also tapped the commercial papers market during this period,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincorp LLP, a Mumbai-based debt advisory firm.
Other issuers like Larsen & Toubro, Reliance Retails, among others have also raised funds during this period.
Meanwhile, rates on these instruments have seen a sharp rise of 20-25 basis points after the Reserve Bank of India (RBI) in its monetary policy hiked repo rate by 50 basis points to tame inflation.
The rate on commercial papers issued by manufacturing companies maturing in three months were trading at 6.30-6.45 per cent by the end of August, as compared to 6.10-6.25 per cent levels at the end of July.
While those on papers issued by manufacturing companies were trading at 6.10-6.30 per cent by August end, as compared to 5.90-6.10 per cent by July-end.
Along with this, yields on Treasury bills have also seen a sharp rise since the RBI started raising rates. The yield on T-Bills across maturities has risen more than 150 basis points.
In the August monetary policy, the central bank has hiked 50 basis points repo rate to 5.40 per cent. This was the third consecutive policy where the apex bank hiked rate since May this year. Till now, the central bank has raised 140 basis points in repo rate to contain the inflation.
Further, analysts believe that the central bank will hike 35-50 basis points after the retail inflation in the country rose to 7 per cent in August, compared to 6.71 per cent in July. It comes after three months of India’s retail inflation easing from its peak.
The Consumer Price Index inflation has remained above the central bank’s upper tolerance band of 6 per cent for the eighth straight month.
Going forward, on the commercial papers issuance front, experts believe that oil marketing companies, telecom companies are likely to tap the market and may remain regular borrowers.
NBFCs may tap the market to raise funds to fulfill the needs of their borrowers during the festive season which is about to start. Telecom companies will raise funds as and when installment due as a short term measure.
“Other regular borrowers including NBFCs will continue to borrow funds regularly subject to availability of liquidity and achieving finer pricing compared to banks,” Srinivasan added.