Companies tiptoe back to banks as bond yields rise

Most demand for working capital; Infra, renewables, manufacturing cos eye capex

- Subhana Shaikh

Banks are lending to companies at a higher pace after several muted quarters, and a strong credit pipeline has raised hopes of a more robust turnaround in the second half of the fiscal.

While much of the new demand is for working capital, companies in infrastructure, renewables and manufacturing are also beginning to consider capital expenditure, bankers said.

At HDFC Bank, corporate and other wholesale loan book grew 6.4% annually and 4.7% sequentially in the September quarter, in contrast to the 1.7% annual growth and 1.3% sequential decline in the June quarter.

Still, demand for capex loans is “very modest,” chief financial officer Srinivasan Vaidyanathan said at the September quarter earnings call on 18 October. “It is largely working capital financing (that) we have participated in (this quarter).”

India’s largest private sector lender had slowed wholesale lending in the previous quarters, as intense competition squeezed margins. It has been fixing its balance sheet ever since the merger with erstwhile parent HDFC Ltd.

Rival Axis Bank’s corporate loan book grew 20% annually and 11% sequentially in the September quarter, against 9% and 6% in the June quarter. The bank has always chosen growth with favourable loan pricing, executive director Subrat Mohanty said.