Indore municipal corporation is going to issue secured redeemable non-convertible debentures (NCDs) of face value of Rs1000. Each NCD would comprise four separate transferable and redeemable principal parts(STRIPS), with each having a face value of Rs 250.
Manappuram Finance has been rated as AA by CRISIL, and AA- by ICRA. Asirvad Microfinance Ltd has been rate as AA- with stable outlook by CRISIL for its long-term borrowing plan while short term rating as A1+.
As a standalone basis, MFL’s net worth stood stable at Rs 33 billion as of 31st March 2022 from Rs 32 billion as of 31st March 2021. Capital Adequacy stood at 19.42% as of 31st March 2022 as compared to 16.85% as of 31st March 2021.
The company has been able to increase its operational efficiency in the past few fiscal years. During FY22, its interest income rose by 20% while net profit increased by 22% on yearly basis. During H1FY23, interest income rose by 44% on yearly basis
DMI Finance Pvt Ltd is rated AA- by both ICRA and CARE rating agencies.
After merger of Shriram Group, Piramal, who holds 20% in SCL and 9.96% in SCUF, will hold 8.37% in Shriram Finance Limited. The merged entity is likely to have assets under management (AUM) of over Rs 1.78 trillion, more than 20 million consumers, and a distribution network of around 3,500.
L&T Finance 2022 & 2023 maturity bonds are the most traded bonds in last 1yr.
In June 2022, the rating agency CARE has upgraded its rating to AA-(stable) from A(stable). The company has received Rs 0.75 billion and Rs 2.55 billion as equity infusion in HFY22 and FY22 respectively from its promoters.
The company’s capitalization profile remains robust as characterized by its capital adequacy stood at 19.15% as of 30th June 2022. Its net worth rose to Rs 123 billion as of 30th June 2022 from Rs 117 billion as of 31st March 2022.
STFCL’s asset quality has been at elevated level in recent years. As of 30th June 2022, its gross NPA stood at 7% as compared to 7.07% as of 31st March 2022 while net NPA came in at 3.52% as compared to 3.67% as of 31st March 2022.
TCCL’s portfolio primarily consists of large project finance investments in renewable energy sectors like wind and solar power generation. Therefore, the funds raised through green bonds can be appropriately utilised to confirm with the green bond principles.
In the current economic scenario of global rate hikes, high inflation have caused INR to trade at lowest level at Rs 79.50. The fall in rupee value has raised currency risk of dollar bonds. Consequently, yield of USD bonds has moved up.
During Q4FY22, the company’s net interest income rose by 21% yearly while it came down by 6% quarterly. However, as per RBI guidelines, it has to make additional provision for expected credit loss during Q4FY21 which stood at Rs 157.4 million.
Post RBI repo rate hike, short end g-sec curve has steepened as compared to longer end g-secs.
Vivriti Capital Private Limited on standalone basis reported Capital Adequacy Ratio (CAR) of 40.31% as on March 31, 2021, with Tier I CAR of 39.71%. The company’s overall gearing at consolidated level was moderate at 1.82 times as on March 31, 2021
UPPCL has been consistently receiving subsidy support from Govt of UP for the past 5 years. UP Govt provided a subsidy of Rs. 74.40 billion in FY16 to compensate losses. Further, during FY17 and FY18, UPPCL got a subsidy of Rs. 44.23 billion and Rs. 44.04 billion respectively.
MAFIL has a strong retail franchise, especially in South India, supported by its long-standing presence in the gold loan business. The promoter has an established track record of operating in the gold loan segment and is actively engaged in the company’s operations.
During Q2FY22, the Shriram City Union Finance has witnessed a net interest income growth of 5% quarterly basis while 18% on annual basis. During the same quarter, net profit rose by 35% quarterly while 9.73% growth annually.
Among the issuers of debt public issues in last three fiscal years, Srei Infrastructure Finance has defaulted while credit rating of India Bull Commercial Credit Ltd, ECL Finance, Aadhar Housing Finance has been downgraded.
IIFL Finance public debt issue offers a reasonable rate of interest but comes with low liquidity, business risk, and economic risk. Investors should weigh whether the risk is commensurate with the returns for investment considerations.
The rise in NPA level, weak profitability lead to a spike in the yield level of bonds.
UPPCL received a loan of Rs 49 billion from Power Finance Corporation and REC. The amount raised was used to partially clear the dues of generating companies. As on July 31, 2021, UPPCL’s pending dues to generating companies stood at Rs 244.61 billion.
Tax-free bonds have been stuck in 3.6% to 4.5% range across maturities and issuers from 1 year to 12 years. Even the longer maturity tax free bonds have hardly reacted to rise in gsec yields that have seen the 10 years and above gsec yields rise 40bps to 60 bps across maturities on inflation fears.
RRVPNL is 100% owned by the GoR and gets timely support from the state government to compensate its capital expenditure and funding requirements. It can be noted that GoR has infused Rs.2.50 billion of equity in this company as of FY20.
Muthoot Fincorp Ltd MLD covered bond is Principal protected in case of call exercised by issuer. It will fetch XIRR of 8.75% if the price of 5.79% G-Sec 2030 >25% of Initial Level else principal repayment.
Bharat bond ETF yield is down from peaks seen this calendar year on RBI holding the 10 year gsec yield at 6% levels. Going forward, inflation and heavy bond supply will keep pressuring the Bharat bond ETF yields to move up.
Piramal Capital & Housing Finance Ltd (PCHFL) is a housing finance company formed in February 2017. The company is a wholly owned subsidiary of Piramal Finance Limited and is the flagship entity of the Piramal group’s financial services business.
Metal companies are benefitting due to a surge in commodity prices in the last 1 year. Strong earnings with a better than business environment have resulted in a fall in credit risk for commodity firms.
During FY22, PSU bond spreads have experienced an uptrend. Owing to RBI’s government bond-buying through G-SAP program and Operation Twist, g-sec yields have fallen by around 20bps to 30bps while corporate bond yields have not fallen as much.
In the latest circular issued by SEBI on perpetual bonds with respect to its exposure in mutual funds, perpetual bond yields have risen sharply by 45bps to 120bps since 12th March 2021. The uncertainty on valuation has hit liquidity in the bonds leading to rising yields.
Bonds of various maturities are trading in the 7% to 8% yield range. Higher credit quality bonds have longer maturities while lower credit quality bonds have shorter maturities. Reading time 3 min
SEBI circular on perps has created a tremor in bond markets. Investors are at the receiving end on the fact that Finmin issued a directive to SEBI. Check out INRBonds risk rating on perpetual bonds.
RBI will keep interest rates unchanged in its policy review this week, the repo rate at 4% is at record lows and with banks having huge surplus liquidity, deposits rates are below 4% for many banks. Investors in bank deposits are getting hardly any returns post-tax.
Frozen credit markets will get a respite from one big risk off the table, political risk.
Credit markets are virtually frozen for all except a few top of the line borrowers.
DHFL bonds with maturities ranging from 6 months to 2 years are trading at levels of over 14%.
Essel Group Companies have started to default on their debt obligations, as they do not have the funds to repay their borrrowings.
Its been almost one year since we launched Search for Yields (SFY), India’s only High Yield Credit Market Newsletter.
The credit spread outlook for AAA-PSU bonds is positive as compared to AAA-NBFC & AAA-HFC bonds that are still showing negative outlook. Lower rated credits are in severe stress, which could increase further.
Take for example a company where its bonds are trading at levels of 18% and the stock price has crashed.
High debt levels of four big groups carries implications for the credit markets, in a slowing economy.
Credit spreads of Indian Steel Sector Issuers could rise if the current downcycle in the sector continues.
The failure to pay back loans to Sterling & Wilson (after offloading stake through OFS with the promise to repay the debt from the OFS), casts a huge shadow on the sustainability of the high debt levels of the Shapoorji Pallonji group.
Inox Wind is India’s leading wind energy solutions provider. Inox Wind is a fully integrated player in the wind energy market with three state-of-the-art manufacturing plants in Gujarat, Himachal Pradesh, and Madhya Pradesh.
AAA to default in just a matter of months, can a company mess up in a few months or has the mess accumulated over ages? In the case of IL&FS, the mess has definitely accumulated over ages as per the latest revelations of the probe by the government.
The IL&FS default and market panic on DHFL are causing a deep stress on credit markets.
IL&FS that was rated AAA a few months ago was downgraded to junk recently, hitting MFs that hold the securities.
In 2015, the green bond market in India started with the issuance size of $100 million to $200 million.
NBFCs have emerged as an important alternate source of credit in the Indian economy.
The INR fell to all time lows on the back of Turkish Lira collapse.
Credits are tricky, one wrong investment means a capital loss that cannot be recovered.
The falling INR has impacted credit markets the most.
We have analysed the performance of NBFCs over the last one year; dividlng them into various categories such as Diversified Business, Auto Loans, Housing Finance, Gold Loan, Infrastructure Finance and Microfinance.
The financial performance of NBFC’s have far outpaced banks in terms of growth, NIMs and NPAs over the last few years.
The factors that drive the high yield credit market are turning negative.
The extreme nervousness is seen going out of credit markets with marginal falls in credit yields at the short end of the curve.
NBFC credits are still seeing high spreads persist in the market as uncertainty on their future liquidity persists.
Expectations of Rate Cuts and RBI removing floor on overnight rates drove down yields on PSU bonds.
For the week ended 6th December, credit spreads were down. Short end PSU-G-sec spreads moved down by 6-40 bps and 10 years maturity spreads moved down by 4 bps, the spreads were at 35-84 bps across maturities.
During the week, BPCL 5-year bond was trading at 6.08%, at spreads of 71 bps. Adani Ports and SEZ Ltd 6-year bond was trading at 7.50%, at spreads of 190 bps, Oriental Insurance Company Ltd 9 year bond was trading at 7.90%, at spreads of 160 bps
As per Financial Stability Report pulished in July 2020 by RBI, the gross and net non-performing asset (GNPA and NNPA) ratios of all SCBs which was at 9.3% and 3.7% at the end of H1FY20 have come down to 8.5% and 3.0% in March 2020.
Union Finance Minister announced the first part of the 20 trillion stimulus package where the government has come to the rescue of credit markets by buying bonds of investment-grade NBFCs, HFIs, and MFIs in both primary and secondary markets.
The market reaction to Franklin Templeton shutting down funds for a total of Rs 280 billion in AUM was a sell-off in financial stocks led by the largest NBFC in India, Bajaj Finance that fell 10%.
Lockdown in India to fight COVID-19 is hurting the Indian economy and financial markets badly.
NTPC was incorporated in 1975 as a thermal generation company and is at present India’s largest power generating entity.
Tata Power Renewable Energy Limited (TPREL) is a wholly-owned subsidiary of The Tata Power Company Limited (Tata Power).
The impact of coronavirus is felt globally across markets leading to rising risk aversion.
Yes Bank issued its first green infrastructure bond in February 2015 for Rs 5 billion. The tenure of bonds was 10 years. The date of allotment was 24th Feb 2015. Bonds were listed on BSE.
In the February 2020 monetary Policy, RBI introduced Long Term Repo Operations (LTRO) where banks can bid for LTRO, which is an ECB concept where ECB lent trillions of Euros to banks to improve credit flows, for 1 year and 3 year auctions at repo rates.
Credit Spreads rose after RBI’s statement on conducting Operation Twist for the second consecutive week. The purchase of 10-year benchmark bond is keeping yields on the bond artificially low and this is leading to spreads rising, as yields on other bonds are almost flat
For the week ended 6th December, credit spreads were down. Short end PSU-G-sec spreads moved down by 6-40 bps and 10 years maturity spreads moved down by 4 bps, the spreads were at 35-84 bps across maturities.
INRBONDS proprietary Credit Spread Score System shows that credit stress can rise further and this could result in more downgrades and even defaults. The score is negative 0.33 in October 2019 against negative 0.12 in September 2019.
For the week ended 13th September, credit spreads were mixed.
Expectations of Rate Cuts and RBI removing floor on overnight rates drove down yields on PSU bonds.
NBFC spreads fell on announcement of economy driving measures by the FM. Read our report on the FM measures.
The measures by the government to provide capital and liquidity to banks and improve the flow of liquidity to HFCs and NBFCs will help credit spreads to stabilize and even come off for the top quality issuers.
Yes Bank bond spreads are trading at levels of 450bps to over 500bps on the back of deterioration in the bank’s balance sheet that led to rating downgrades. Read our note on Yes Bank Perpetuals. The credit market is risk averse with spreads between the PSU Bonds and all other bonds at higher levels.
One year CP and CD yields fell by 15bps and 30bps respectively on the back of rate cut expectations.
3 year bonds are trading at spreads of 100 bps for PSU issuers (Non REC-PFC) while top quality low credut risk NBFCs bonds are trading at 145bps spreads Such sreads look extremely attractive on the yield curve, given low interest rates and liquidity infusing measures by the RBI.
Bond markets are wary of the uncertainties and this week election results will move bond yields.
In the last week of April 2018, RBI further relaxed investment conditions for FIIs to invest in INRBONDS.
Falling INR and rising UST yields have led to FIIs selling INR Bonds.
MF’s exposure to G-secs was at Rs 1.01 trillion as on February 2018, which is a 3 year Low.
In the Union budget 2018-19, the government showed its intentions to consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market and A grade rating corporate bonds as eligible for investments.
10 Year SDLs and 10 Year AAA Corporate Bonds are trading at almost similar spreads of 55-60 bps against the benchmark 10 year g-sec. SDLs are perceived as risk free given States access to the central government and RBI for funds to meet debt obligations, if required.
Manufacturing sector Commercial Papers (CP) 3 months, 6 months and 12 months maturity yields are at levels of 6.68%, 7.30% and 7.70% respectively. NBFC Commercial Papers (CP) 3 months, 6 months and 12 months maturity yields are at levels of 7.27%, 7.55% and 7.90% respectively.
10 years AAA Credit Spreads fell below 50 bps on a weekly basis as Corporate Bond yields turned sticky. at higher levels even as 10 years G-sec yields rose sharply to over one year highs on the back of various factors.
3 year credit spreads rose while 5 & 10 year credit spreads were largely flat post RBI policy last week.
FII’s have been buying SDLs (State Development Loans) over the last 4 months (since July 2017).
Credit spreads have tightened over the last 3 months.
Commercial Papers (CP) outstanding were at Rs 4796 billion as on October 2017.
Corporate bond yields rose while credit spreads were largely flat post RBI policy last week.
RBI has revised rules for FPI (Foreign Portfolio Investor) investment in Government securities.
RBI, from 3rd October, will categorise Rupee Denominated Bonds known as Masala Bonds as ECBs (External Commercial Borrowings) and allow FIIs to buy into Rs 440 billion of Corporate Bonds over the next two quarters.
Credit spreads have been ranged bound over the last 3 months with AAA credit moving in a 15bps to 20bps range.
Corporate bond yields closed flat last week.
RBI lowering the Repo Rate and maintaining neutral stance is highly positive for credit spreads.