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Companies rushed to raise funds via CP to lock in lower rates ahead of RBI policy
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IANS | 04 Aug, 2022
Ahead of the Reserve Bank of India's (RBI) monetary policy, most
companies are rushing to short-term debt market to raise funds through
commercial papers to lock-in lower rates because after policy
announcement they expect rates on these instruments to rise further.
According to the data compiled from market sources,
companies raised Rs 37,920 crore through commercial papers (CP) since
July 25, with highest being raised on July 27 worth Rs 13,425 crore.
Small
Industries Development Bank of India raised Rs 9,450 crore, the highest
among all the companies who raised funds in last few days, which was
followed by Reliance Jio Infocomm Ltd raising Rs 6,450 crore, Hindustan
Petroleum Corp Ltd raising Rs 5,400 crore, and Larsen and Toubro Ltd
raising Rs 5,000 crore.
These four companies raised nearly 70 per cent of the total amount raised by the companies through CPs since July 25.
"In
general demand for credit has picked up due to pick in economic
activities and higher working capital requirements due to increased
prices. This could be a reason for the increase in CP issuances," said
Pankaj Pathak, Fund Manager-Fixed Income at Quantum Asset Management
Company.
In the last few weeks, rates on CPs rose around 30-40
basis points due to falling surplus liquidity from the banking system
and in expectation of further rate hike by the RBI.
Rates on CPs
issued by non-banking finance companies were in the range of 6.05-6.20
per cent, as against 5.80-6.00 per cent two weeks back. While, rates on
papers issued by manufacturing companies were in the range of 5.85-6.05
per cent, as compared to 5.60-5.80 per cent earlier.
"The pricing
of all short-term instruments including CP, CD and T-Bills have gone up
due to withdrawal of liquidity from the system last week. System
liquidity, supply side constraints besides future rate hike expectations
are the key drivers for immediate pricing/yield volatility of
short-term instruments," said Venkatakrishnan Srinivasan, founder and
managing partner at Rockfort Fincorp, a Mumbai-based debt advisory firm.
Going
forward, market participants expects issuers to raise more funds in the
coming days due to increase in credit off-take and robust economic
growth. Further, investors may become selective when system liquidity
drains or they may demand higher yield.
"We expect credit demand to remain robust in coming quarters as economic growth is getting broad-based," Pathak added.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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