Unable
to raise money through tax-free bonds, public sector entities are turning to
private placements, hoping to raise close to R50,000 crore through corporate
bonds. As a result, bond sales in the January-March quarter could cross R1 lakh
crore, with insurance companies, banks and provident funds as buyers.
Retail and high net worth
investors have shunned tax-free offerings thanks to unattractive yields.
Merchant bankers said
Indian Railway Finance Corporation (IRFC) has already started the process. “IRFC
has been talking to large investors because they know tax-free bonds don’t have
any takers,” said a merchant banker with a leading private bank. Rural Electrification
Corporation (REC) fell short of its aim to raise R4,500 crore through tax-free
bonds, attracting just R2,100 crore earlier this month. Power Finance
Corporation (PFC), which launched its tax-free bond offer after REC, had to
extend the closing date by a week till Thursday. PFC has received just around
R670 crore worth of bids so far, a merchant banker said.
Merchant bankers said
the IIFCL offer that opened on Wednesday and the Hudco bonds expected in January,
may fare even worse.
Hudco can raise around
Rs 10,000 crore while IIFCL is targetting Rs 9,200 crore.
