How seven traders are changing the Indian corporate bond market

• Posted by Sindhuri G August 30, 2012 - Filed in Business - 2,047 views

  MUMBAI: Seldom do men and women in the bond market make it to front pages for the right reasons. Occasionally, news of an obscene bonus payout receives flitting attention. But in a market that is less followed, though far bigger in size, than stocks, there are untold stories of how little-known and reclusive people have taken big calls, shown risk appetite and collaborated as well as crossed swords to make money.

  ET profiles seven traders redefining the bond game: AK Mittal (AK Capital), Nipa Sheth (Trust Capital), Baman Mehta (Darashaw), Shashikant Rathi (Axis Bank), Rakesh Singh (HDFC Bank), Nirav Dalal (YES Bank) and Sudershan Sharma (ICICI Bank). Together they represent a fascinating story: A few high-street banks displaying sudden aggression, brokerages emerging as big investors, old players in the market fine tuning strategies and the league table race never slowing down. Such stories stay within dealing rooms, thanks to the complexities of the bond market and the comparatively less flamboyant nature of the characters. But, a languid stock market has pushed corporates and banks to float bonds. Here's a story of how the Indian corporate bond market is slowly changing.
  
  The young trader never met Jeetubhai in the five years he spent at the bank's bond desk. Someone from Jeetubhai's office would occasionally drop by after the dealing hours and request him to buy a bond with a promise that the security would be bought back at a decent premium. The man never broke his promise.
  
  For the trader (now working for a fund house), it was pointless to think what kind of a bond it was, the price it was trading at, how interest rates were moving, and whether there was a risk that the paper could be downgraded - the usual stuff dealers check before putting money.
  
  Here, the call was not on the bond: it was on Jeetubhai, the broker with an amazing clout in small, little known banks in Gujarat. It was a given that before 'parking' the bond with the trader's bank, another willing buyer - may be a co-operative bank in Ahmedabad, who would not ask too many questions have been lined up to buy the bond.
  
  It was a quid pro quo that worked like a well-oiled machine: a trader fearing he would miss his bonus due to a few wrong calls would get a helping hand from a broker; such favours were not forgotten and when the market improved he would find a way to offer some cosy deals to the broker. In an opaque market where no one knew the 'right' price of a corporate bond, the world the Mumbai money market outside was clueless about the existence of such transactions.
  
  A CHANGING TURF
  
  Even after a decade, few outsiders understand the mechanics and intrigue of the market that has multiplied in size, turned ruthlessly competitive and more transparent. (In the last five years, more than Rs 7 lakh crore bonds were issued and placed with investors as against less than Rs 90,000 crore raised through equity offerings.) Jeetubhai and his men still knock on the doors of banks in Rajkot and Ahmedabad to cut deals, but they have been left behind by new players in a turf that is changing dramatically.