Business · Markets · 1 hr ago
RBI measures may draw Indian companies back to the bond market
Some Indian companies may return to the domestic bond market after cancelling or scaling back planned issues because yields were too high.
Analysts say recent steps by the Reserve Bank of India are expected to offer some support to the rupee.
The central bank has opened a special dollar window for Indian Oil, Bharat Petroleum and Hindustan Petroleum to meet their daily foreign currency needs, directing that demand away from the open market.
Borrowing choices have narrowed as overseas yields remain high and hedging against currency movements has become more expensive.
Rising bank lending costs could make bonds a more appealing option for some companies, and bond payment schedules may also help them manage cash flow.
Companies that return may accept only the amount investors offer at yields they consider acceptable.
Borrowing overseas is still possible, but future issues will depend on international market conditions and investor demand.
Indian companies that reduced or cancelled domestic bond issues may reconsider them after recent Reserve Bank of India measures aimed at stabilising the rupee, analysts said.
High overseas yields and rising currency-hedging costs have narrowed companies’ borrowing choices.
Some issuers may accept only bids offering yields they find acceptable, rather than the full amount sought.
Bonds may appeal to some companies as bank borrowing costs rise and bond coupons can be paid less frequently than bank loan interest.
The RBI has opened a special dollar window for Indian Oil, Bharat Petroleum and Hindustan Petroleum to meet daily foreign-currency needs from Monday.
- Who
- Indian companies that cut back or cancelled domestic bond offerings.
- What
- They may return to the bond market after recent RBI measures, analysts said.
- When
- After the RBI’s weekend measures; the dollar window opened from Monday.
- Where
- India’s domestic bond market.
- Why
- Measures aimed at stabilising the rupee may provide some cushion, while rising bank borrowing costs could make bonds more attractive to some issuers.
This story does not have two clearly opposing sides.
Some issuers that cancelled bond offerings earlier because yields were higher than their bank borrowing costs may return to the market now
However, they may not necessarily accept the entire issue amount and could choose to accept bids only up to a level of yield they are comfortable with
The RBI announced a suite of measures expected to provide some cushion to the rupee.
The RBI’s special dollar window for Indian Oil, Bharat Petroleum and Hindustan Petroleum began meeting their daily foreign-currency requirements.
- Policy rate
- A large bank’s external benchmark-linked lending rate is 8%.
- Borrower spread
- Top-tier borrowers typically pay 200–300 basis points above that rate.
- Bond yield
- Five-year bonds from AAA-rated quasi-public sector companies offer indicative yields of around 7.90%.
- Dollar window
- Indian Oil, Bharat Petroleum and Hindustan Petroleum can meet daily foreign-currency requirements through the RBI window.
- Crude oil
- Prices remained above $100 a barrel.
Sources
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