AP and Telangana to borrow Rs 1,000 crore each at RBI bond auction on 17 November

Andhra Pradesh and Telangana are set to borrow Rs 1,000 crore each (face value) from the bond market on Tuesday, 17 November, at an RBI bond auction in which ten states are seeking Rs 23,300 crore between them. Maharashtra’s Rs 8,000 crore is the largest share. The Reserve Bank of India named the states in its auction notice on Friday, 13 November.

Andhra Pradesh is reopening a bond it first sold on 29 July, a 7.68% security that matures in 2051. Telangana has split its share equally, Rs 500 crore each, between two bonds it issued on 1 July: a 7.53% paper due in 2039 and a 7.65% paper due in 2049. Because these are re-issues, the interest rate is already fixed, and bidders compete only on the price they will pay.

That fixed rate sets the yearly interest payment. At 7.68%, Rs 1,000 crore of Andhra Pradesh’s 2051 bond carries interest of Rs 76.80 crore a year, paid in half-yearly instalments until it matures.

Second trip to the market in November

The sale follows the auction of Tuesday, 3 November, when each state borrowed Rs 3,000 crore. Andhra Pradesh sold Rs 1,000 crore of a bond due in 2035 and Rs 2,000 crore of one due in 2056, at yields of 8.0089% and 8.1463%. On the longer bond it received Rs 96.26 for every Rs 100 of face value. Telangana issued two new bonds of Rs 1,500 crore each, running 20 and 26 years, at yields of 8.17% and 8.15%.

If the full amounts are accepted on 17 November, each state’s borrowing through these auctions in November will reach Rs 4,000 crore. Neither state took part in the auction of Monday, 9 November, where a Bihar bond that also matures in 2051 sold at Rs 96.56, a yield of 8.0816%. For October to December, the RBI’s indicative calendar puts the combined market borrowing of states and union territories at Rs 3,60,820 crore.

How individuals can bid

Up to 10% of each bond is set aside for non-competitive bids from individuals and institutions that qualify under the RBI scheme, and no single such bid may exceed 1% of that bond’s notified amount. The notice sets 10.30 am to 11 am on 17 November for non-competitive bids, and competitive bids close at 11.30 am. Individuals can also use the RBI Retail Direct portal, rbiretaildirect.org.in, to place non-competitive bids. Bonds are issued in multiples of Rs 10,000.

At the 3 November sale, non-competitive demand outran its quota on some bonds. Telangana’s 20-year bond drew 15 non-competitive bids for Rs 184.381 crore against Rs 150 crore available, and allotments were scaled down to about 81%. The RBI will declare the outcome of the 17 November sale the same day, and successful bidders must pay on Wednesday, 18 November.