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Tamal Bandyopadhyay
Mumbai, May 30: A string of corporates have temporarily shelved plans to float bonds as nervousness has gripped the domestic debt market, triggered by the Indo-Pak skirmishes in Kargil area of Jammu & Kashmir.
Merchant banking sources confirmed the development saying a number of corporates as well as public sector undertakings which were slated to hit the market over the next few weeks have shelved their plans and adopted a "wait and watch" policy. However, the exact amount of debt issues being shelved could not be confirmed.
"Corporates are holding back their debt issues as there is an overall uncertainty... and the `nervous' market is not showing much appetite for long-dated papers at this moment. Banks and institutions are not willing to take fresh positions," said a senior official of an investment bank.The sharp rally at the long end of government papers came to an abrupt halt last week with the sudden development at the border. The gilts prices crashed between 50 paise and 75 paise on the news ofIndian air-strike at Kargil and particularly the prices of long-dated securities took a beating. "We would prefer to wait till the volatility subsides. Any further escalation in the border situation may warrant a relook at the fund raising strategy," said a PSU official.
Bond market boomed in May with corporates tapping the easy liquidity condition to raise relatively "cheap" funds. Reliance Industries set the ball rolling and followed up by Indian Oil Corporation, Nirma and Housing Development Finance Corporation in quick succession.
RIL raised Rs 400 crore five-year zero-coupon bonds at an yield of 13 per cent. Close on the heels of RIL, IOC mopped up Rs 500 crore one-year money at 11.25 per cent. The 500 crore issue, which included a greenshoe option of Rs 200 crore, garnered oversubscription to the tune of Rs 1,700 crore.Last week, HDFC mopped up Rs 75 crore one-year fund at 11.15 per cent and Rs 150 crore worth of three-year fund at 12.10 per cent.
"A host of corporates and PSUs have firm plans totap the market. However, they are likely to postpone the floats as banks are preferring to stay liquid till normalcy returns to the markets. The call rates have shown signs of firming up while the rupee breached the 43 level against the dollar and forward premiums hardened. This may not be the best of times to hit the market," said a chairman of a public sector bank.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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