EPFO invests in private sector corporate bonds for the first time after IL&FS default
This is the first time EPFO has invested in bonds issued by a private entity since the default of Infrastructure Leasing & Financial Services Ltd (IL&FS) in late 2018.
Employee Provident Fund Organization (EPFO), one of the largest corporate bond investors, underwrote more than 65% of the Rs 10,000 crore bonds issued by the Housing Development Finance Corporation on Tuesday, and this was followed by the SBI pension and provident funds, people familiar with the development said. This is the first time EPFO has invested in bonds issued by a private entity since the default of Infrastructure Leasing & Financial Services Ltd (IL&FS) in late 2018.
HDFC raised Rs 10,000 crore through the issuance of non-convertible debentures maturing in 10 years at an annualized coupon rate of 7.18%. The bond’s fixed coupon is only 17 basis points higher than the new annualized yield on benchmark 10-year bonds and 6 basis points lower than government bonds of similar maturity.
Given EPFO’s request, other issuers with AA ratings and above could tap into the market to benefit from better rates and strong demand from a large segment of investors, said one. broker from a brokerage firm.
The EPFO ceased its investments in bonds issued by private companies but remained an active investor in public company bonds. Indeed, they had faced a lot of pressure after IL&FS and group companies Deewan Housing Finance Corporation and Reliance Capital defaulted on their debt securities.
But, recently after investing in HDFC, the trend seems to be reversing as they look for more investment opportunities in the absence of government securities supply and low issuance of corporate bonds by entities. public.
The housing finance company is unlikely to tap into the market by the end of the year after a major fundraising since December. According to data compiled from market sources, HDFC raised Rs 14,500 crore in the past three months, much of it in the first week of December.