Sources aware of the developments told ET that NABFID is eyeing a bond sale worth up to ₹10,000 crore, while the Delhi-Mumbai Expressway aims to garner funds worth up to ₹3,000 crore. Amongst banks, state-owned lenders Bank of Baroda and Canara Bank are looking to raise funds worth up to ₹10,000 crore and ₹5,000 crore, respectively, through the issuance of infrastructure bonds, the sources said.
The massive bond pipeline comes at a time when government bond yields have eased significantly from seven-month highs touched in early October. Yield on the 10-year benchmark bond was last at 7.25%. The benchmark yield had climbed to 7.38% on October 6. Government bond yields are the benchmarks for pricing corporate bonds.
“NABFID’s bond sale will most likely occur around mid-December and the security will be of 15-year maturity. After their debut bond sale worth ₹10,000 crore in June, which was through 10-year bonds, they have decided to opt for a longer maturity paper this time as bonds in the long-term infrastructure space are seeing firm demand from investors,” a source said.
Amongst other investors including banks, large institutional players such as insurance firms, pension and provident funds are expected to show appetite for NABFID’s bonds. NABFID, which is one of the latest entrants in India’s infrastructure financing sector, is a government-owned development finance institution.
The Delhi-Mumbai Expressway, which seeks to connect India’s national capital to the country’s financial capital, has received a ‘letter of comfort’ from the National Highways Authority of India for its bond sale worth up to ₹3,000 crore, sources said.
“Their bonds will likely be of 15-year maturity with a base size of ₹1,000 crore and a green shoe option of ₹2,000 crore. The issue will likely be carried out in end-November or early December,” a source said.
BANK INFRASTRUCTURE BONDS
Bank of Baroda will likely carry out its ₹10,000 crore infrastructure bond issuance towards the end of November, with the public sector lender looking to issue 10-year bonds.
Meanwhile, Canara Bank’s infrastructure bonds, also of 10-year maturity, will likely be up for bidding on Thursday. The south-based lender’s bond sale is to have a base size of ₹1,000 crore and a green shoe option worth ₹4,000 crore.
“The pricing for the two bond sales (Bank of Baroda and Canara Bank) could be in the region of 7.65-7.70%,” a source said.
Banks, particularly state-owned banks, have stepped up issuances of infrastructure bonds in the current financial year, with State Bank of India having issued such bonds worth ₹10,000 crore each in July and September. The bond sales have witnessed firm demand from investors, as reflected in the tight spreads with government bonds of comparable maturity.