Yields on Shriram Transport’s dollar bonds drop on easing liquidity conditions


Mumbai: Yields on Shriram Transport FinanceNSE -0.30 %’s US dollar bonds fell in the past three and a half months amid signs of economic slowdown bottoming out and easing liquidity conditions that could help revive the demand for second hand trucks.

Overseas bond yields dipped about 77-91 basis points between October 4 and January 24 this year, during the period US benchmark Treasury yields, a key gauge, rose about 10 basis points. Yields on Shriram bonds are at 4.42 per cent, down from 5.33 percent in October.

During the same period another series of papers yielded 4.75 per cent now versus 5.52 per cent earlier.

“Continued stability in earnings and financial performance along with robust liquidity and borrowing profile helped it gain investor confidence,’’ said an investment banker who was involved in arranging the sale and did not want to be identified.

Non-Banking Finance Companies squeezed by risk aversion in the domestic market post the collapse of Infrastructure & Leasing Financial Services in 2018 are leaning towards the global markets. With the main source of domestic funding – mutual funds – reducing exposure to the sector, overseas funds have become a necessity.

Shriram Transport Finance began raising funds since last February after the Reserve Bank of India eased norms for shadow lenders. It has raised about $1.65 billion in dollar denominated bonds.

In its maiden overseas bond sale, Shriram had raised $400 million from 80 global investors. Earlier this month it raised $500 million which was bid four times.

Domestic bonds with a coupon of 9.3 per cent maturing in July 2023, trades at Rs 1029, offering a yield-to-maturity of 10.05%. Similarly, the NCD maturing in November 2028, trades at Rs 1,020, yielding 9.75 per cent.

In July 2019, the public issue of Shriram Transport NCDs offered a maximum interest rates up to 9.7 per cent. The latest January primary issue this year the company NCDs offered 60 basis points lower interest rates. It paid investors a maximum interest rate of 9.1 percent.

But the domestic economy is believed to be on an upswing after economic growth was estimated to have fallen to a 11-year low this fiscal. Furthermore, the liquidity conditions have also improved with banks depositing more than Rs. 4 lakh crores in the RBI’s reverse repo facility.