Recently, National Highways Authority of India (NHAI) came out with its Rs 100 bn bond issue. With the listing date just around the corner, there is a considerable euphoria surrounding it. So much so that the grey market premium for these bonds has increased from Rs 5 to Rs 22 in just a month and quite understandably so. Being a tax free instrument, 8% coupon offered is effectively translating into a yield of 11-12% for investors in the highest tax bracket. As a result, High Net-worth Individuals (HNI) and institutional investors are actively trying to lay their hands on this issue through off-market deals.
Further, there are strong indications that the interest rate cycle has peaked out. This has further increased the attractiveness of these bonds (interest rates and bond prices tend to move in opposite direction). Sovereignty of the bonds (eliminates credit risk) is an additional feature. Thus, it appears that the NHAI bonds too are on a way for a bumper listing like the State Bank of India (SBI) bonds. In fact, the current economic scenario (flight to safety) has meant that listing gains are not just a feature of equity markets.
Further, there are strong indications that the interest rate cycle has peaked out. This has further increased the attractiveness of these bonds (interest rates and bond prices tend to move in opposite direction). Sovereignty of the bonds (eliminates credit risk) is an additional feature. Thus, it appears that the NHAI bonds too are on a way for a bumper listing like the State Bank of India (SBI) bonds. In fact, the current economic scenario (flight to safety) has meant that listing gains are not just a feature of equity markets.
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