Tuesday, January 25, 2022

Air India PF trusts sell debt papers before Tata acquisition

Mumbai/New Delhi: Air India appears to have caused some turbulence in India's bond markets.

Two provident-fund trusts at the Tata-bound carrier are selling an estimated Rs 4,500-5,000 crore of bond portfolio, including debt sold by states, the Centre and some corporates, as the management of the corpus will now shift to the Employees’ Provident Fund Organisation (EPFO) after the Tata Group takeover.

Air India has to complete the sale of its assets in the provident fund trusts and the proceeds will be transferred to EPFO.

“Our process is moving fast and the transfer should happen soon,” a government official told ET on the condition of anonymity.

Air India did not respond to ET’s mailed queries.

Bajaj Finance, Mahindra and Mahindra Finance, Indiabulls Edelweiss, State Bank of India (SBI), Aditya Birla Finance, Yes Bank, Srei and Reliance Capital are among the other bonds on the offer, three people familiar with the matter told ET.

“About three-fourth of the securities held in the portfolio (in value terms) have changed hands releasing cash to the seller,” said one of the persons cited above.

This move is weighing on the local debt market particularly at a time when bond yields are rising mirroring global yield spikes. The benchmark bond yield surged 21 basis points this calendar year, pulling prices down.

Local bond houses along with select large private sector banks have bought those papers. Some top-rated public sector company bonds up for sale include those of Power Finance Corporation, Rural Electrification Corp and National Highway Authority of India (NHAI).

Some of those securities, not top-rated, yielded 11.68-32.52 percent, dealers said.

ECL Finance bonds, rated A+ (Stable) and AA-, yielded 32.52 percent in the secondary market although the non-banking finance company has not demonstrated any sign of stress in recent times. Those bonds sold in 2015 at a high coupon of 11.25 percent are supposed to mature in May, 2025.

“This is a simple demand-supply equation as buyers take advantage of a special situation arising from the seller,” said a senior bond dealer.

Indiabulls Financial Services papers, rated AA (Stable) and AA+ and carrying a coupon of 10.65 percent, changed hands at 17.95 percent. Those securities sold in 2012 will mature in June, 2027.

25/01/22 Saikat Das & Mihir Mishra/Economic Times

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