• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books
• Gallery

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Remya Nair
Priya Nair

Mumbai, June 29 The lull in the corporate bond market seen in the first quarter of this fiscal is expected to change after the Budget.

Bankers and market participants expect more corporate bond issuances from the second quarter, given the Government thrust on the infrastructure sector and the likely tax sops.

As infrastructure projects need more long-term capital, the debt market would be the preferred route for corporates, said analysts. Institutions such as India Infrastructure Finance Company and National Highway Authority of India are expected to tap the debt market soon.

“With the new government’s thrust on infrastructure, the market for corporate bonds will pick up as credit demand rises. LIC will invest over Rs 50,000 crore in the corporate bond market this year against the Rs 48,000 crore invested in 2008-09,” said Mr Thomas Mathew, Managing Director, LIC.

“Currently more corporates are raising funds through the short-term issuance route. So there are not many long-term issuances. Public sector issuances are also lower because they have access to bank loans and other funds. For instance, a one-year loan is cheaper than a five-year and 10-year bond”, said Mr B. Prasanna, Managing Director and CEO, ICICI Securities Primary Dealership.

Mr Munish Varma, Managing Director, Head of Global Markets, Deutsche Bank, India, said given the ample liquidity in the banking system and the low loan rates, corporates looking to raise funds found it much easier to borrow from banks.

According to data from ICICI Securities, there were 130 bond issuances and Pass-through Certificates between January and June 2009, amounting to Rs 59,270 crore. In the same period last year, there were 296 issuances for Rs 52,256 crore.

At present, the returns in the corporate bond market are around 8.5 per cent against 11-14 per cent last year. However, this is only temporary and the situation may change after the Budget, said Mr Mathew.

According to Mr Mukesh Agarwal, Director, CRISIL Ratings, the long-term infrastructure bonds could face a problem of finding investors.

“Banks may not be interested in investing as they would prefer to give loans. Mutual funds may not have funds to invest in such long-term papers and insurance companies would be bound by guidelines regarding exposure,” Mr Agarwal explained.

More Stories on : Corporate Bonds | Outlook | Budget | Infrastructure

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line