Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Debt Market Review: October 2018 Contact: Kavita Chacko Senior Economist kavita.chacko@careratings.com 91-22-67543687 Dr. Rucha Ranadive Economist rucha.ranadive@careratings.com 91-22-67543531 Mradul Mishra (Media Contact) mradul.mishra@careratings.com 91-22-67543515 A. PRIMARY ISSUANCES Central government borrowings: The central government borrowings amounted to Rs. 44,000 crore in Oct 18, 22% higher than the borrowings of Rs. 36,000 crore in Sept 18. During Apr-Oct 18, the GSec issuances totaled Rs. 3.24 lakh crore, 25% lower than the Rs. 4.16 lakh crore of issuances in the same period last year. The cost of borrowing for the Central Government moderated in Oct 18 from that a month ago. The weighted average yield of GSecs auctioned in Oct 18 at 8.14%, was 5 bps lower than the yield in Sep 18, which was at a 2 year high. There has been a sustained increase in the GSec auction yields in the last 7 months, a rise of 61 bps during Apr-Oct 18. 70,000 60,000 50,000 40,000 30,000 20,000 10,000 November 22, 2018 I Economics - 7.53 7.86 GSec Auctions 7.96 7.99 7.99 8.19 8.14 8.40 8.20 8.00 7.80 7.60 7.40 7.20 7.00 Amount Auctioned (Rs. Crore) Yield (%) T-bill auctions: In Oct 18, the Treasury bill auctions amounted to Rs. 75,000 crore, taking the total treasury bills auctions to Rs. 5.04 lakh crore in Apr-Oct 18, 15% more than that in the comparable period last year. Disclaimer: This report is prepared by CARE Ratings Ltd. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report Table 1: Treasury Bills Auctions Month Amount Weighted avg. Month Amount Weighted (Rs. Cr.) Yield (%) (Rs. Cr.) avg. Yield (%) Nov-17 55,000 6.16 May-18 75,000 6.53 Dec-17 44,000 6.23 Jun-18 60,000 6.76 Jan-18 70,000 6.42 Jul-18 72,000 6.78 Feb-18 56,000 6.47 Aug-18 90,000 6.93 Mar-18 53,000 6.34 Sept-18 72,000 7.22 Apr-18 60,000 6.29 Oct-18 75,000 7.21
Although, the cost of borrowings via T-bills witnessed a marginal decline in Oct 18 (1 bps to 7.21%) from that in the previous month, the weighted average yields of the T-bill auctions continued to be at a 2.5 year high. In Oct 18, there has been moderation in the (weighted average) yields across maturities 91-days treasury bill yield fell by 4 bps to 6.98%, 181-days declined by 1 bps to 7.28% and 364-days decreased by 9 bps to 7.56% compared with that in Sept 18. State Government Borrowings: In Oct 18, 21 states raised Rs. 46,577 crores by way of state development loans (SDLs), Rs. 21,139 or 45% more than in Sept 18. The amount raised was Rs. 4,455 crore lower than the notified amount of Rs. 51,032 crore as Assam did not accept any bid while Gujarat, Madhya Pradesh, Sikkim and Tamil Nadu accepted lower number of bids. During FY19 (Apr-Oct), various states have borrowed a total of Rs. 2.04 lakh crore by way of SDLs, which was 4% lower than the Rs. 2.12 lakh crore raised during the comparable period a year ago. The average cost of borrowing for the states declined by 15 bps from 8.73% in Sept 18 to 8.58% in Oct 18. However, it was 68 bps higher than the average yield of 7.90% in Apr 18. In terms of state-wise quantum of borrowings in Oct 18, Uttar Pradesh borrowed the highest at Rs. 8,500 crore. The cost of borrowing was highest for Jammu and Kashmir (8.86%) and the lowest for Chhattisgarh (8.06%) in Oct 18. Table 2: State Development Loans Month No. of Amount Raised Weighted Average yield (%) States (Rs. Cr.) Avg. Min Max Apr-17 10 16,450 7.62 7.59 7.70 May-17 17 21,625 7.51 7.41 7.55 Jun-17 16 26,880 7.19 7.10 7.24 Jul-17 19 33,263 7.21 6.93 7.31 Aug-17 22 38,487 7.26 7.02 7.32 Sept-17 21 41,235 7.40 7.28 7.50 Oct-17 19 34,520 7.56 7.29 7.66 Nov-17 21 31,068 7.55 7.11 7.73 Dec-17 20 39,852 7.69 7.35 7.82 Jan-18 27 48,665 7.91 7.76 8.07 Feb-18 24 45,046 8.19 8.05 8.30 Mar-18 25 41,260 8.15 7.69 8.33 Apr-18 20 31,728 7.90 7.28 8.24 May-18 17 24,880 8.19 7.20 8.37 Jun-18 13 19,980 8.40 8.18 8.62 Jul-18 17 32,926 8.48 8.43 8.59 Aug-18 16 22,551 8.47 8.37 8.52 Sept-18 19 25,438 8.73 8.62 8.84 Oct-18 21 46,577 8.58 8.06 8.86 Table 3: State wise SDLs in Sept 18 (Rs. Cr.) State Amount notified (Rs Cr) Amount accepted (Rs Cr) Cut off yield (%) Weighted average yield (%) Andhra Pradesh 5,000 4,543 8.61 8.60 Assam 500 NA NA NA Chhattisgarh 1,500 1,500 8.08 8.06 Goa 100 100 8.65 8.65 Gujarat 5,000 3,588 8.61 8.60 Haryana 1,500 1,500 8.60 8.60 Himachal Pradesh 500 500 8.77 8.77 Jammu & Kashmir 400 325 8.86 8.86 Karnataka 7,500 7,500 8.43 8.43 Kerala 1,500 1,500 8.54 8.54 Madhya Pradesh 3,000 2,096 8.27 8.29 Meghalaya 150 150 8.74 8.74 Puducherry 100 100 8.45 8.45 Punjab 2,300 2,300 8.67 8.68 Rajasthan 1,500 1,500 8.61 8.62 Sikkim 232 125 8.85 8.85 Tamil Nadu 4,500 3,500 8.62 8.63 Telangana 3,000 3,000 8.58 8.57 Uttar Pradesh 8,500 8,500 8.71 8.71 Uttarakhand 250 250 8.70 8.70 West Bengal 4,000 4,000 8.73 8.73 Grand Total 51,032 46,577 8.57 8.58 Corporate Issuances: In Oct 18, Rs. 39,014 crs was raised by way of corporate bond issuances, 38% higher than the issuances of Rs. 28,372 crore in Sept 18. Private placements accounted for nearly 98% share of the issuances (Rs. 38,207 crore), while public issuances amounted to Rs. 807 crore. In terms of sectoral bifurcation of the corporate bond issuances, banking/term lending accounted for the major share or 47% of issuances followed by housing finance (27%) and financial services/investments (14%). 2
15-Apr 30-Apr 15-May 30-May 15-Jun 30-Jun 15-Jul 31-Jul 15-Aug 31-Aug 15-Sep 30-Sep 15-Oct 31-Oct 72,990 56,770 87,440 85,020 134,160 126,730 99,550 167,710 147,850 111,260 112,520 79,910 94,930 Rs. Cr. 156,120 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 3,510 3,649 1,981 235 807 Rs. Cr. 11,695 15,024 26,719 6,150 17,153 20,662 34,215 37,864 29,748 31,729 22,222 28,372 38,207 39,014 46,794 47,029 In FY19 (Apr-Oct) the corporate bond issuances totaled to Rs. 2.31 lakh crore, 38% lower than the issuances to the tune of Rs. 3.74 lakh crore in the comparable period in FY18. 50,000 40,000 30,000 20,000 10,000 - Corporate Bond Issuances Public Issues Private Placements Total Source: PRIME Database Table 4: Sectoral corp. Bonds in Oct 18 (Rs.Cr.) Issue amount (Rs. Industry Cr.) Banking/term lending 15,145 Diversified 3,500 Financial services/investments 3,629 Hospitals/diagnostic services 50 Housing finance 8,845 Housing/civil construction/real estate 111 Textiles 300 Trading (incl. exports) 800 Source: PRIME Database Commercial paper (CP) issuances: Commercial paper issuances by corporates have risen in the current fiscal year. During Apr-Oct 18 commercial papers to the tune of Rs. 15.33 lakh crore were issued, Rs. 2.43 lakh crore (or 19%) more than the issuance of Rs. 12.90 lakh crore in Apr-Oct 17. Banking/term lending accounted for the highest share of 19% of these issuances, followed by oil exploration (15%), financial services/investments (11%), fertilizers (11%), housing finance (11%) and power generation & supply (9%). Table 5: Sectoral CPs in Oct 18 (Rs. Cr.) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Commercial Paper Issuances FACE VALUE Industry INR (Rs. cr) Automobiles 700 Banking/Term Lending 6,940 Cement & Construction Materials 270 Chemicals 268 Diversified 2,400 Engineering 1.5 Fertilizers 4,150 Financial Services/Investments 4,200 Floriculture 50 Household & Personal Products 150 Housing Finance 3,898 Housing/Civil Construction/Real Estate 150 Information Technology-Hardware 250 Mining/Minerals/Metals 200 Oil Exploration/Drilling/Refining 5,500 Power Generation & Supply 3,475 Steel Tubes/Pipes/Wires/Products 50 Steel/Sponge Iron/Pig Iron 1,550 Telecommunications 300 Textiles 450 Travel/Transportation/Courier 1,625 Tyres & Tubes 320 Source: PRIME Database 3
1-Oct 3-Oct 4-Oct 5-Oct 8-Oct 9-Oct 10-Oct 11-Oct 12-Oct 15-Oct 16-Oct 17-Oct 19-Oct 22-Oct 23-Oct 24-Oct 25-Oct 26-Oct 29-Oct 30-Oct 31-Oct 1-Oct-18 3-Oct-18 5-Oct-18 7-Oct-18 9-Oct-18 11-Oct-18 13-Oct-18 15-Oct-18 17-Oct-18 19-Oct-18 21-Oct-18 23-Oct-18 25-Oct-18 27-Oct-18 29-Oct-18 31-Oct-18 % 1-Oct-18 3-Oct-18 5-Oct-18 7-Oct-18 9-Oct-18 11-Oct-18 13-Oct-18 15-Oct-18 17-Oct-18 19-Oct-18 21-Oct-18 23-Oct-18 25-Oct-18 27-Oct-18 29-Oct-18 31-Oct-18 % B. SECONDARY MARKETS GSec yields: GSec yields fells during the month. Average yields were 14 bps lower at 7.95% from month ago levels (8.09%). The decline can be attributed to the RBI maintaining a status quo on interest rates at its policy meet, the central government reducing its gross borrowing for this fiscal and the OMO purchases undertaken by RBI. However, the liquidity deficit in the banking system and the concerns over inflation with the gains in global crude oil prices and the rupee deprecation exerted upward pressure on yields. 8.2 8.1 7.99 8 7.9 7.8 7.7 7.6 Source: FIMMDA 10 years GSec Yield 7.85 Treasury bill yields: Treasury bill yields too fell during the month. The average yield of 91-days T-Bill fell by 4 bps to 6.93% (from 6.97% in previous month) and that of 364-days T-Bills declined by 5 bps to 7.51% (from 7.56% in Sept 18). As against to these, the average yields on 180-days increased by 2 bps to 7.22% (7.20% in Sept 18). 7.8 7.6 7.4 7.2 7 6.8 6.6 7.60 7.31 7.02 T-Bills Yields 7.47 7.22 6.93 Source: FIMMDA 90 days 180 days 364 days Corporate bond spreads: The spread of AAA rated corporate bonds over GSec widened across tenures during Oct 18. The comparison of spreads as of end Oct 18 over end Sep 18 shows that the spread of 1 year papers widened by 12 bps, 3 year by 24 bps, 5 year by 20 bpsand 10 year by 24 bps. Table 6: AAA corporate bond spread Date 1-yr 3-yr 5-yr 10-yr 13-Jul 109 75 57 97 31-Jul 92 71 58 82 14-Aug 73 65 58 73 31-Aug 85 76 68 81 14-Sep 87 61 60 74 28-Sep 105 86 68 77 15-Oct 99 97 86 91 31-Oct 117 110 88 101 Source: FIMMDA MIBOR: In Oct 18, the average MIBOR (Mumbai Interbank Offer Rate) was 6.54%, 2 bps lower than that in the previous month (6.56% in Oct 18). 6.65 6.6 6.55 % 6.5 6.45 6.4 6.35 MIBOR (overnight) 4
1-Oct-18 3-Oct-18 4-Oct-18 5-Oct-18 8-Oct-18 9-Oct-18 10-Oct-18 11-Oct-18 12-Oct-18 15-Oct-18 16-Oct-18 17-Oct-18 19-Oct-18 22-Oct-18 23-Oct-18 24-Oct-18 25-Oct-18 26-Oct-18 29-Oct-18 30-Oct-18 31-Oct-18 Rs. lakh crore Liquidity Conditions Source: FBIL Barring the first week of the month, the banking system was faced with liquidity deficit in Oct 18, mainly attributable to higher festive season fund requirements, the liquidity crunch in the NBFC sector and increased forex sales by the RBI to curtail the depreciation of the rupee. The liquidity deficit prevailed despite the RBI infusing liquidity in the banking system by way of OMO purchase to the tune of Rs. 36,000 crore (11 th, 17 th and 25 th Oct). 1.50 1.00 0.50 0.00-0.50 Net Liqudity Deficit -1.00 Note: Net liquidty = repo+term repo+msp-reverse repo-term repo (+) deficit/ (-) Surplus Net liquidity was in the surplus during the first week of Oct 18 (1 st -5 th ) with average daily liquidity surplus of Rs. 27,451 crore after which the system slipped into a deficit with average liquidity deficit of Rs. 89,360 crore during 9th-31st Oct 18. The repo transactions (repo + term repo + MSP) during the month decreased marginally from Rs. 1.68 lakh crore on 1st Oct 18 to Rs. 1.28 lakh crore on 31st Oct 18. The total reverse repo transactions (reverse repo + term reverse repo) declined from Rs. 1.62 lakh crore on 1st Oct 18 to Rs. 29,142 crore on 31st Oct 18. Banking Bank deposits: As of Oct. 26, 2018, the aggregate bank deposits amounted to Rs. 117.7 lakh crore. The incremental bank deposits grew by 3% compared with the 0.4% growth during Apr-Oct 17. Bank Credit: The outstanding bank credit stood at Rs. 90.34 lakh crore as on Oct. 26, 2018. The incremental bank credit growth improved and grew by 4.7%, compared with the 0.6% growth in same period previous year. In H1-FY19, all sectors registered improvement in the credit off take. Food credit that has merely 1% weightage in the total bank credit grew by 13.5% from the (-) 9.5% growth in H1-FY18. Industrial sector registered marginal improvement of 0.1% compared with the (-)1.5% growth in the corresponding period last year. Credit growth in the services segment too has improved and grown by 7.4% this year from the negative growth of (-) 1.5% in H1 FY18. Similarly, agriculture and allied activities grew by 2.4% over the 0.5% in the corresponding period last year. Retail segments grew at a lower rate of 5.8% than 8.3% growth in H1-FY18. 5
19-Jan-18 2-Feb-18 16-Feb-18 2-Mar-18 16-Mar-18 30-Mar-18 27-Apr-18 11-May-18 25-May-18 22-Jun-18 20-Jul-18 17-Aug-18 31-Aug-18 14-Sep-18 26-Oct-18 109.3 111.1 110.5 111.9 111.6 Rs. Lakh Cr. 114.7 114.3 113.9 114.0 113.5 114.4 115.1 116.5 115.7 117.7 5.0 4.0 3.0 2.0 1.0 0.0 1.7 Bank Credit growth (%): Apr-Oct'18 2.6 1.2 0.6 4.7 FY14 FY15 FY16 FY17 FY18 Within the industrial sector, there has been improvement in the credit off take of 10 key industries especially glass and glassware (20.7% growth over -1.3% last year), chemical and chemical products (8% than -8.7% contraction in the previous year), infrastructure (5.1% compared with a contraction by -1.3%), wood and wood products (3.8% as against 0.8% a year ago), and rubber and plastic products (4.3% growth compared with 3.7% last year). 120.0 118.0 116.0 114.0 112.0 110.0 108.0 106.0 104.0 O/s Bank Deposit Table 7: Sectoral distribution of credit Sector O/s Sept 28, 2018 (Rs.lkh.cr) Sept 17 / Mar 17 (% Growth) Sept 18/ Mar 18 (% Growth) Gross Bank Credit 80.2 0.9 3.8 Food Credit 0.5-9.5 13.5 Non-food Credit 79.8 1.0 3.8 Agriculture & Allied Activities 10.5 0.5 2.4 Industry 27.0-1.5 0.1 Services 22.0-1.5 7.4 Personal Loans 20.2 8.3 5.8 CARE Ratings Credit Rating of Fresh Debt Issuances Some of the entities that were assigned rating by CARE Ratings for their fresh debt issuances in Oct 18 have been listed in the table below. Table 8: Credit Rating by CARE: Fresh Debt Issuance of Corporate (October 18) Company Size rated (Rs. crore) Current Rating JM Financial Home Loans Limited 100 AA National Cooperative Development Corporation 500 AA Source: CART report CORPORATE OFFICE: CARE RATINGS LIMITED (Formerly known as CREDIT ANALYSIS & RESEARCH LIMITED) Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022. CIN: L67190MH1993PLC071691 Tel: +91-22-6754 3456 I Fax: +91-22-6754 3457 E-mail: care@careratings.com I Website: www.careratings.com Follow us on /company/care Ratings /company/care Ratings 6