According to reports from The Economic Times, Reliance Industries, India's biggest company by market value, is raising ₹12,500 crore in a five-year bond issue with Axis Bank, HDFC Bank, ICICI Bank and Yes Bank among the lenders arranging the transaction. The bonds are expected to be priced at around 7.47% and are scheduled to close on September 18. The issue comprises a ₹10,000 crore base size and a ₹2,500 crore greenshoe option, with about ₹3,000 crore placed with anchor investors. Axis Bank is expected to have the largest allocation of these bonds, followed by ICICI Bank, HDFC Bank and Yes Bank, according to people familiar with the transaction.
As reported by The Economic Times, the remaining portion of the issue has also been fully subscribed, indicating strong investor demand. The transaction represents Reliance Industries' first major foray into the domestic bond market since 2023, with its previous retail bond issue in 2023 being for a longer 10-year maturity and seeing significant participation from Life Insurance Corporation of India. However, LIC is not a significant investor in the current issue, partly because of the shorter five-year maturity and the strong liquidity available with banks.
According to The Economic Times, the transaction comes after Indian banks mobilised a record amount through FCNR(B) deposits under the Reserve Bank of India's special swap facility. Banks raised $127.2 billion through the scheme by August 31, taking total inflows under the special schemes to $136.4 billion. ICICI Bank alone mobilised $17.88 billion through FCNR(B) deposits, while the bank also issued $3.55 billion of dollar-denominated bonds during July-August. However, banks have been cautious about aggressively deploying the funds, as visible at the short end of the interest-rate curve. "The short end, the rates have come off, so that is very visible. But whether it will percolate into the long end remains to be seen," said a person familiar with the strategy of banks, pointing to uncertainties around geopolitics, crude oil prices and global bond yields.
As reported by The Economic Times, BofA estimates that the additional FCNR liquidity could ultimately result in 'unencumbered credit creation of ₹25-40 lakh crore', equivalent to 7-11% of India's GDP or 11.5-18% of existing non-food credit extended by banks over a two-to-three-year period. For banks, the key avenues for deployment of this liquidity are corporate loans, project finance, corporate bonds, working capital or other assets. However, some experts say the additional FCNR liquidity may also translate into faster corporate credit growth in the coming quarters, or could put pressure on lending spreads as banks compete for deployment opportunities. "The biggest impact of the FCNR (B) deposits will be for banks in India, which in the last three years have been deposit constrained, and have relied incrementally on wholesale funding through the CD market, to see a greater availability of funds," BofA said in a recent research report.
