Indian two thousand rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

No Takers For Bajaj Electricals’ Rs 165-Crore NCD Issue

Bajaj Electricals Ltd. withdrew its Rs 165-crore debt issue as the home appliance maker failed to draw investors amid tight liquidity conditions.

The company withdrew the private placement of 1,650 rated unsecured listed redeemable non-convertible debentures of Rs 10 lakh each, according to its statement. The issue, offering an interest rate of 11 percent, opened for subscription to banks, mutual funds and non-bank lenders on May 6 but didn’t receive subscriptions, it said.

“We had anticipated no demand for this NCD issue due to liquidity scenario and political uncertainty but just took a chance,” Anant Purandare, chief financial officer at Bajaj Electricals, told BloombergQuint. “There is liquidity issue in the market right now due to mutual funds being under pressure.”

The problem is not specific to Bajaj Electricals. Investors are reluctant to invest in paper of non-prime issuers, according to Mahendra Kumar Jajoo, head of fixed income at Mirae Asset Global Investments. “The gap between the coupon rates being offered by non-prime names and prime companies has widened due to the liquidity pressure,” he said. “One of the top rated companies has raised money recently at 8.7 percent. For low rated companies, even at 11 percent the demand is feeble.”

Even though the central bank cut rates, yields on government securities and corporate bonds have gone up, said R Sivakumar, head of fixed income at Axis Mutual Fund. The yield for even a AAA-rated public sector company has gone up from 7-7.5 percent a month ago to up to 8 percent now.

The board of Bajaj Electricals had approved raising Rs 350 crore through NCDs. The first tranche in February for Rs 200 crore at 11 percent got subscription for only Rs 185 crore, Purandare said.

While the second tranche for the remaining Rs 165 crore failed to generate demand, he said the intention for raising the money was to convert some of the short-term working capital loans to long-term debt. Of the company’s total debt worth Rs 1,600 crore, about Rs 200 crore is long term and Rs 1,300-1,400 crore is working capital loans, he said, adding that the short-term borrowings are backed by current assets.

(Corrects the earlier version that misstated the CFO name)