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Credence Debt League Table H1 FY 04-05

Debt mobilisation picks up, PTCs steal the show Rising yields failed to stem the growth in debt mobilisation in the first half of the financial year.

Total debt mobilisation via issuance of private placement of debt issues in H1FY05 was Rs.28,050 crore, a rise of around 30% when compared to HIFY04.
This was powered by a near 5-fold rise in the Pass through Certificates (PTCs). The issuance via (PTCs) was Rs.10,537.40 crore compared to Rs.2932.45 crore in the H1FY04. Securitisation of the loan portfolio and issuance of these loan receivables in the form of Pass through Certificates frees the resources of the financial institution and helps them comply with the capital adequacy
norms. Further the RBI norms classifying the investment of banks in the PTCs of home loan receivables into priority sector lending has improved the market for such issues. Stringent capital adequacy requirements and the growing credit offtake is expected to give a further boost to the securitisation market.

Public financial institutions, which were the largest borrowers last year borrowed Rs.3,312 crore this year – a drop of 62%. Regular issuers in this category preferred to make external commercial borrowings. The borrowing of the state level undertakings was almost unchanged. Private sector financial institutions borrowed much more at Rs.4,368 crore to finance growing consumer loans portfolios. Top rated public sector undertakings like NTPC, GAIL preferred ECB route to the domestic market leading to drop in their domestic issuance. The private sector corporates, especially the power and telecom sector corporates borrowed higher amounts to finance their expansion plan.

HDFC was the largest issuer mobilising Rs.2,050 crore via five issues, the majority of which were floating rate bonds. IDBI raised Rs.1,210 crore. However, the largest single issue was that of Tata Tele which mopped Rs.970 crore via 10-year bond issue. The 5-year Indal issue managed to get the best pricing of 6.39%, a spread of 53 basis points above semi-annual risk-free yield at the time of issuance.

The 5 yr AAA benchmark bond yield rose by 118 basis points, mirroring the rise in the secondary yields. A bearish outlook over interest rates and expectations of increase in credit offtake reduced the interest of traders in the corporate debt market, which is expected to impact liquidity of bond issues.

One of the major highlights of the market was the increase in investor appetite for floating rate bonds (FRBs). FRBs accounted for more than 1/3rd of the total issuance compared to negligible issuance in the last year. Majority of the floating rate bonds used 1-year risk free yield as the benchmark reflecting the bearish sentiment of the market over the short term interest rates.