NBFC liquidity normalises: Fresh bond sales jump 30% in January, reflects renewed confidence among investors

Amidst the challenging liquidity constraints faced by the sector following the IL&FS bankruptcy, the corporate bond issuances on a monthly basis has seen falling

Press Trust of India February 20, 2019 07:37:26 IST
NBFC liquidity normalises: Fresh bond sales jump 30% in January, reflects renewed confidence among investors
  • NBFCs are the biggest issuers of debt in the corporate bond market, controlling nearly 90 percent of the volume

  • Shadow bankers depend on the bond market to raise short -term capital for on-lending, and they go to banks for long-term finance

  • Fresh corporate bond issuances by NBFCs saw a decline from 71.6% in July 2018 to 64.6% in August 2018

Mumbai: Signalling an end to the liquidity crisis that NBFCs have been facing since last September, corporate bond issuances by them have risen by 30 percent in January, reflecting renewed confidence among both issuers as well as investors, says a report.

It can be noted that non-banking finance companies or NBFCs are the biggest issuers of debt in the corporate bond market, controlling nearly 90 percent of the volume. With the 30 percent spike in fresh issuances in January, their share has clawed backed to the near normal levels to 82.2 percent of the volume.

Shadow bankers depend on the bond market to raise short -term capital for on-lending, and they go to banks for long-term finance.

In the previous seven months, amidst the challenging liquidity constraints faced by the sector following the IL&FS bankruptcy, the corporate bond issuances on a monthly basis has seen falling.

NBFC liquidity normalises Fresh bond sales jump 30 in January reflects renewed confidence among investors

Representational image. Reuters

Fresh corporate bond issuances by NBFCs saw a notable decline from 71.6 percent (of the total flow) in July 2018 to 64.6 percent in August 2018.

Between September and November 2018, issuances rose each month rising to almost 80 percent in November 2018. But the liquidity challenges deepened in December as bond sales by NBFCs plunged almost 30 percent.

"The first month of 2019 has seen an uptick again with share of corporate bond issuances by NBFCs rising by 30 percent to touch 82.2 percent, reflecting renewed confidence among issuers and investors," a report by Care Ratings said.

But the HFCs continue to lag and the share of fresh issuances by housing finance companies plunged deeper from 10.1 percent in July 2018 to a trickle of 2.5 percent in
December 2018.

But the share has almost doubled on a month-on-month basis from 2.5 percent in December 2018 to 5.2 percent in January 2019, the report said.

In terms of funds raised through commercial papers, the share has seen a significant decline among NBFCs to the tune of 14.1 percent between July 2018 and January 2019 while that of HFCs declined 12.1 percent, the report said.

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