PSU bond issues hit pause as yields rise despite RBI rate cut

A growing disconnect between monetary policy signals and bond market pricing is forcing state-owned borrowers to step back from planned fundraisings.

- Subhana Shaikh

On Monday, Indian Railway Finance Corp Ltd (IRFC) became the third public sector issuer—after Power Finance Corp (PFC) and Small Industries Development Bank of India (Sidbi)—to withdraw a bond issue within a week.

IRFC withdrew its plans to raise up to ₹5,000 crore through zero-coupon bonds (ZCBs) as there was limited interest from investors to bid for tight pricing, three merchant bankers told Mint.

According to a bid book accessed by Mint, IRFC withdrew its up-to-₹5,000-crore zero-coupon bond maturing in 10 years after it received bids worth over ₹4,461 crore in the range of 6.63-7.23%. The company had expected a coupon rate of around 6.8%, with the cutoff in the range of 7.23-7.25%.

This follows last week’s cancellations of PFC’s plan to raise up to ₹3,500 crore through 15-year bonds, and Sidbi's plan to raise up to ₹8,000 crore through November 2029 bonds as they did not find the right pricing, the merchant bankers cited above said on condition of anonymity.