Shriram Group Cautious On Bond Market; Eyes GIFT City For New Offerings

Shriram Wealth Ltd. is exploring multi-manager or broking-linked products, which it plans to route through GIFT City, according to Naval Ramesh Kagalwala, the company’s chief operating officer and head of product. However, it has no plans to set up a physical office at GIFT City for now, he said on the sidelines of an event.

Shriram Wealth is a 50:50 joint venture between the Shriram Group and South Africa-based Sanlam Group, aimed at providing financial solutions to Indian investors. It will begin operations in the top 10 cities across the country.

Meanwhile, Subhasri Sriram, managing director and chief executive officer of Shriram Capital Ltd., said the group is taking a cautious stance on the corporate bond market, as heightened volatility in the secondary market has disrupted primary bond issuances.

“We're staying away from the market, not because we don’t want to issue, but due to the volatility,” she said. “We’re watching the market develop.”

The group, a frequent issuer in the bond market, has stayed out in June as pricing dislocations in the secondary market have made primary issuance unattractive. Shriram Capital is the holding company for several group entities, including Shriram Finance.

“After the repo and CRR cuts, the market has turned extremely volatile,” she said. The Reserve Bank of India last week slashed the repo rate by 50 basis points to 5.50% and announced a 100-basis-point reduction in the cash reserve ratio, to be implemented in four equal tranches starting September 6.

“The secondary market is still not deep enough,” she added, noting that swings in yields are impacting new offerings. “If the secondary market offers bonds at higher coupons, investors naturally prefer those over primary issues.”

This disconnect, she said, is a key reason behind the group’s pause in fresh debt raising. Sriram also pointed out that while the retail debt market is slowly evolving, it still lacks the depth and liquidity seen in equities. “The equity market has many regulated players.

Unfortunately, the same can’t be said for the debt market.”

For now, she said, the group’s strategy is simple: monitor conditions and act once stability returns.