Telangana investors vie to bond with the best

Hyderabad: The bonds being issued by the TS government to raise funds, also known as State Development Loans are in great demand in the auction conducted by Reserve Bank of India. Foreign Portfolio Investors (FPIs) are vying to purchase these bonds.

While the government issued bonds worth Rs 1,000 crore last month, the FPIs made bids for bonds worth Rs 4,815 crore, indicating their popularity. TS is giving tough competition to states like Gujarat,  Maharashtra, Tamil Nadu and Kerala, which were known to be the most sought-after for buyers earlier. Seeing the demand, the TS government has  lined up more auctions next month to raise funds for its projects. “The demand is benefitting the state government. This is because the interest rate has come down. Loans through auction of bonds are being secured at the interest rate of 8 per cent as against 9 to 10 per cent earlier. We have the flexibility to offer lower interest rate now due to huge demand for our bonds from investors, especially FPIs,” said a senior finance department official.

After bifurcation, there was no clarity on the actual financial status of the new state in the first two financial years 2014-15 and 2015-16. While the 2014-15 Budget was only for 10 months, the first Budget for the full year was presented in 2015-16. The investors waited for the 2015-16 Budget till March 31, 2016 and after it was found that TS payment capability was good with revenue-surplus Budget, they aggressively started bidding for TS bonds from April 2016. Normally, the Centre allows states to sell bonds worth Rs 1,000 crore per month through the RBI, but looking at TS revenue surplus, the Centre allowed the state government to issue Rs 4,000 crore bonds in the first quarter from April-June 2016.

Of this, bonds worth Rs 1,000 crore were auctioned on April 18. Following the huge response, the state government sought permission to auction bonds worth Rs 1,500 crore on April 26, which was approved by the Centre. This is in line with the Centre allowing the TS government to secure loans up to 3.5 per cent of GSDP as against 3 per cent earlier, by virtue of it being a ‘revenue-surplus state’, as per 14th Finance Commission.