Commercial papers of non-banking finance companies (NBFC) worth Rs 88,300 crore are due for redemption in the first quarter of the current financial year and are likely to get rolled over in coming months. According to India Ratings and Research, commercial papers worth Rs 2,26,000 crore are due for maturity in April-June, of which Rs 85,200 crore is due of corporates, Rs 88,300 crore of NBFCs, and public entities worth Rs 52,500 crore.
The National Bank for Agriculture and Rural Development, Reliance Jio Infocomm, Indian Oil Corp, Reliance Retail and Housing Development Finance Corp are among the top five issuers with major redemption due over the next three months. “CPs are likely to be refinanced. The proportion of CP in the borrowing mix has declined substantially since FY18 when it was in double digits. Now, we are seeing CP borrowings from NBFCs and the proportion is rising gradually,” said Pankaj Naik, director, India Ratings and Research.
In March, issuances of commercial papers rose month-on-month due to seasonal factors such as improving balance sheet liquidity arising from closing of books at the end of the financial year. The pick-up was witnessed due to large issuances by NBFCs and other corporates.
Moreover, worsening macroeconomic conditions amid the geopolitical tensions have started affecting sentiments across the global capital markets. This, along with higher working capital requirements owing to rising input costs, has resulted in corporates and financial institutions preserving liquidity in the book.
Rates on these instruments have a maturity of the long term after a sharp upward movement from September 2021 onwards amid expectations of rate hikes across the globe and the subsiding effect of the third wave. Higher tenure commercial papers remained in the range of 4.75-5.00% since January. “With the rise in inflation and surge in oil prices amid the expectation of a balanced stance from the RBI, Ind-Ra expects CP rates to witness an upward trajectory (from) hereon,” the agency said in a report.