Fresh bond issuance by companies has dwindled sharply in the last few months because issuers are delaying their fund raising plan expecting Reserve Bank of India (RBI) to cut policy rate going forward.
Also, expectation of tax-free bonds flooding the markets from November has also reduced fresh issuance by companies.
Media reports suggest that corporate bond issuances declined from 100 in July to 46 in October, a decrease of over 50 percent.
It is learnt that some of the better-rated companies have preferred to borrow in the overseas markets, where they can still make an arbitrage of about a percentage point, including the hedging costs.
Public sector undertaking, who are the regular borrowers, have also delayed bond issue because of expectation of RBI reducing policy rates, reports suggest.
Some analysts expect issuances to start picking up slowly in the next few weeks. The government, in its budget for FY 2013, has allowed 10 infrastructure companies to raise Rs 53,000 crore by issuing tax-free bonds, which is double the amount they were allowed to raise last year through similar bonds from retail investors.
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