Corporate bond issuances surged, with borrowers raising around ₹27,000 crore this week as a decline in bond yields lowered borrowing costs and encouraged issuers to tap the market.
The issuance pipeline remains active, with Housing and Urban Development Corporation (HUDCO), Small Industries Development Bank of India (SIDBI), and Rural Electrification Corporation (REC) planning to raise a combined ₹13,000 crore through bond sales next week.
Yields on high-rated corporate bonds have softened by nearly 50-70 basis points following the RBI’s recent measures to attract inflows through FCNR(B), external commercial borrowing, and other channels, and growing market confidence that policy support will help stabilise funding conditions and the rupee. The yield on the 10-year government bond softened almost 9 bps this week.
The revival in the primary market comes after comparatively muted activity in the first two months of the current financial year, with elevated yields prompting borrowers to tap bank loans. Indian companies raised a little over ₹1.07 trillion through the domestic bond market in April and May, down nearly 58 per cent from the year-ago period and the lowest mobilisation in the first two months of a financial year since FY23. Market participants attributed the sharp decline in issuances to elevated bond yields amid geopolitical tensions in West Asia, which kept issuers away from the debt market.
“The recent surge in corporate bond issuances reflects issuers making a beeline to the bond market to lock in funding while the issuance window remains favourable,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP. “While floating-rate structures had witnessed strong demand until recently, many issuers now seem more comfortable locking in current yields rather than remaining exposed to future benchmark resets,” he added.
Institutions such as the National Bank for Financing Infrastructure and Development (NaBFID), National Bank for Agriculture and Rural Development (Nabard), Housing and Urban Development Corporation (HUDCO), Small Industries Development Bank of India (SIDBI), Rural Electrification Corporation (REC), and LIC Housing Finance, along with private sector issuers such as Bajaj Finance, Bajaj Housing Finance, Tata Capital, Tata Capital Housing Finance, HDB Financial Services, Sundaram Finance, Kotak Mahindra Prime, and L&T Finance, have either tapped the bond market recently or are scheduled to raise funds in the coming days.
On Friday, infrastructure financier NaBFID raised ₹5,000 crore through two tranches of non-convertible debentures. The development finance institution accepted bids worth ₹2,500 crore in a 10-year bond at a yield of 7.66 per cent and ₹2,500 crore in a three-year bond at 7.37 per cent.
Issuance activity has also broadened across maturities. While the three-year segment continues to attract demand from mutual funds and bank treasuries, several issuers have also raised funds through five-year and 10-year bonds. Market participants said borrowers are increasingly looking to term out liabilities and secure longer-tenor funding amid uncertainty surrounding the medium-term outlook for interest rates, inflation, crude oil prices, and global geopolitical developments.
“Several issuers had deferred their borrowing plans amid uncertainty. As market stability has improved, yields have softened and RBI measures have supported liquidity and foreign inflows, those planned issuances are now returning to the market, leading to a pickup in corporate bond supply,” said Ajay Manglunia, executive director and FIM head at Capri Global Capital Ltd.
In April and May, several large state-owned issuers withdrew planned bond issuances amid concerns over pricing and demand. Market participants said some issuers were either unable to raise the desired amount at targeted rates or were unwilling to borrow at high yields. Nabard was among the issuers that withdrew its planned bond issue.
