Stories
PSU Bond Sales Plummet as Investors Demand Higher Yields; Private NBFCs Raise ‘2.58 Trillion
- •PSU bond issuances are declining as state-run companies withdraw or scale down sales due to investors demanding higher yields, while private firms and NBFCs continue to tap the domestic debt market.
- •Private-sector issuers raised ‘87,305 crore in September through private placements, accounting for nearly 80% of the total ‘1.09 trillion raised, with PSU issuance at a mere ‘250 crore.
- •Private NBFCs and financial-services companies secured ‘40,577 crore, and manufacturing and services players raised ‘46,728 crore, driven by an anticipated rate hike, prompting companies to lock in favorable borrowing costs.
- •From April 1 to September 28, private-sector issuers raised ‘4.07 trillion (76% of total), with NBFCs and financial-services companies accounting for ‘2.58 trillion, significantly outpacing the ‘4,921 crore from pure PSU issuance.
- •Several PSUs, including SIDBI and Sagarmala Finance Corporation, withdrew or scaled down bond issues due to a pricing mismatch, as investors sought higher yields, highlighting a divergence in funding strategies between public and private sectors.
Key Questions Answered
Public sector undertakings are scaling down or withdrawing bond sales due to a pricing mismatch, as investors demand higher yields ahead of expected rate hikes while state-run issuers refuse to accept higher borrowing costs. Because they have access to alternative funding sources like bank loans, these entities prefer to withdraw rather than pay unattractive yields.
Private-sector issuers raised Rs 87,305 crore through private placements in September, accounting for nearly 80 percent of the total Rs 1.09 trillion raised during the month.
The Small Industries Development Bank of India called off a Rs 6,000 crore bond issue after investors sought yields between 7.6 and 8.1 percent, Sagarmala Finance Corporation withdrew a Rs 600-crore blue bond, and Power Grid Corporation accepted only Rs 2,000 crore against a planned Rs 5,000-crore fundraise.
