Flood of Cheap Cash Lifts India Company Bond Sales to Record
An employee holds a stack of electronic payment receipts and Indian Rupee banknotes in Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)

Flood of Cheap Cash Lifts India Company Bond Sales to Record

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(Bloomberg) -- Indian companies have sold a record amount of shorter-tenor bonds this month as the central bank floods markets with cheap cash.

Firms have issued 316.8 billion rupees ($4.1 billion) in April of local-currency notes due in about three years, the most for any month ever. There’s another 149.2 billion rupees in the pipeline from companies ranging from Tata Group-controlled Indian Hotels Co. to the nation’s largest mortgage lender Housing Development Finance Corp.

Flood of Cheap Cash Lifts India Company Bond Sales to Record

The easy access to such cash, used for daily operations and paying off debt, brings some comfort at a time of unprecedented challenges. Asia’s third-largest economy has ground to a halt after authorities ordered the world’s biggest lockdown to slow the spread of the coronavirus.

To ease strains on corporate finances, the central bank last month announced it would fund banks’ purchases of 1 trillion rupees in company bonds through its targeted long-term repo operations. Given that the money was supplied for three years, banks have been buying notes that mature in about that much time.

“The rush for funds among companies will continue as a lot of issuers will want to benefit from the liquidity the RBI is infusing,” said Hetal Sonpal, Kolkatta-based Associate Director at the brokerage Trust Investment Advisors.

The Reserve Bank of India has since unveiled further steps to steer more of the stimulus to cash-hungry borrowers. Burdened with the world’s worst bad-debt ratio, lenders initially appeared to have focused on buying top-rated debt to avoid credit risks. Purchases they made in the primary market, for example, were all in bonds of companies with the highest debt grades.

To ensure that funds go to the country’s cash-hungry borrowers, RBI announced on Friday it would provide another 500 billion rupees via a second round of long-term repo operations. Lenders need to invest at least 50% of that money in commercial paper and bonds of small- and mid-sized shadow lenders and micro-finance firms.

RBI Governor Shaktikanta Das said Friday that those smaller firms have been “more severely impacted” by the pandemic than public sector entities and big companies, and emphasized that the latest round of cash measures is just the start.

India’s credit market cheered the announcement. The average yields on top-rated three-year corporates notes have dropped to the lowest in more than a month.

©2020 Bloomberg L.P.

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