Tamil Nadu raises funds through long-tenure bonds, amid higher interest rates

The State government raised ₹6,000 crore on Tuesday through bonds of over 20 years

September 29, 2022 12:46 am | Updated 12:46 am IST - CHENNAI

The Tamil Nadu government has raised ₹6,000 crore through bonds of over 20 years, amid an increase in interest rates.

The State borrows from the market through bonds known as State Development Loans (SDLs). At an auction conducted by the Reserve Bank of India on Tuesday, Tamil Nadu reissued SDL, which was issued on February 16, 2022, and raised ₹3,000 crore. The issue had a yield of 7.62% and a tenure of 25 years.

It also reissued the SDL, issued on June 2, 2021, and raised ₹1,500 crore. The bond with a tenure of 29 years had a yield of 7.62%. Further, Tamil Nadu raised ₹1,500 crore through the reissue of SDL issued on February 2, 2022. The bond had a tenure of 30 years and a yield of 7.62%.

The cut-off yield of 7.62% for the long-tenure bonds issued by Tamil Nadu is lower than the weighted average cut-off of 7.67% of the 10-year State government securities. It is also lower than the cut-off of 7.68%-7.69% for the 18-20 year securities issued by other States at Tuesday’s auction, said Aditi Nayar, Chief Economist, ICRA Ltd. She pointed out that Tamil Nadu did not accept any bid for its 10-year bond at the previous auction, and the State seems to have locked in an attractive yield through the issue of longer-tenure bonds, compared with others.

In the first half of fiscal 2023, the State has raised ₹33,000 crore through SDLs, lower than ₹39,000 crore in the same period last year. Till July this fiscal, the net borrowings, when adjusted for repayments, was ₹12,028 crore, lower than the ₹28,000 crore in the same period last year.

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