Backed by an easing of system liquidity and constructive views on rates, activity in the Commercial Paper (CP) market has picked up ahead of the busy season starting from October 2024, according to India Ratings and Research (Ind-Ra).
“CP issuances by corporates and financial institutions have shown strong growth. Corporates and financial institutions issued CPs of ₹52,400 crore and ₹53,700 crore, respectively, in August 2024, compared to ₹39,700 crore and ₹45,600 crore in July 2024,” Ind-Ra said, adding the strong momentum in the CP market is expected to continue in the third quarter (3Q) FY25.
The agency noted that banking system liquidity remained in surplus in August 2024, in a continuation from July.
“While the pressure on profitability has intensified for corporates, regulatory tightening has started impacting growth for financial entities, too. In this situation, the easing of monetary conditions has provided relief to borrowers by way of a drop in short-term borrowings’ cost,” said Soumyajit Niyogi, Director, Core Analytical Group, Ind-Ra.
September 2024 data shows CP maturity is stable in terms of both value and number of issuers.
CPs maturing in September, October, and November 2024 amount to ₹1.63 lakh crore, ₹50,000 crore and ₹82,000 crore, respectively, as per the agency’s assessment.
Of the aggregate amount of ₹2.9 lakh crore of CPs maturing over this period, those by corporates amount to ₹1.04 lakh crore (35 per cent), non-banks ₹1.19 lakh crore (40 per cent), public finance entities ₹50,000 crore (17 per cent) and public entities ₹22,000 crore (8 per cent).
CPs (amounting to Rs 2.9 lakh crore) of 216 issuers mature in the next three months, with the top 10 issuers (regularly active in the market) accounting for ₹1.1 lakh crore (40 per cent of the total aggregate amount). The remaining 60 per cent is accounted for by the balance CP issuers.