The corporate bond market is buzzing again, with over ₹12,500 crore raised on Tuesday and total issuances this month expected to hit ₹1 trillion as softer yields have reduced borrowing costs. Around ₹27,000 crore was raised last week.
Yields on high-rated corporate bonds have eased by 50-70 basis points so far in June.
On Tuesday, Small Industries Development Bank of India (SIDBI) raised ₹6,000 crore through a five-year bond at a coupon of 7.40 per cent, while REC Ltd raised ₹4,000 crore through a 10-year issue at 7.46 per cent. Housing & Urban Development Corporation (HUDCO) accepted bids worth ₹2,140 crore against a base issue size of ₹3,000 crore. The bonds, maturing on July 18, 2029, were priced at a yield of 7.23 per cent.
The momentum in June comes after a rather tepid first two months of the current financial year, with a little over ₹1.07 trillion raised 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.
“Given the volume already raised, the strong pipeline under execution and the continued appetite for AAA-rated issuances, total bond mobilisation during June could comfortably exceed ₹1 trillion,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.
NIIF Infrastructure Finance Ltd raised ₹410 crore on Tuesday against a notified issue size of ₹500 crore through a price-based auction. The bonds, maturing on August 21, 2029, were priced at par, implying a yield of 7.88 per cent.
The domestic bond market is witnessing a pick-up in fundraising activity as borrowers seek to take advantage of a decline in yields and improved market sentiment.
“The issuance calendar remains crowded and investor demand for high-rated paper continues to be strong across maturities. Given the volume already raised this month and the transactions lined up over the next two weeks, crossing ₹1 trillion in issuances should not be difficult,” said a market participant.
The primary market pipeline remains active, with around ₹27,000 crore worth of issuances witnessed during the previous week. Issuances are expected from Tata Capital Housing Finance, Bajaj Finance, Mahindra & Mahindra Financial Services, Cholamandalam Investment and Finance Company, and several other financial institutions and non-banking financial companies.
Market participants said the breadth of the pipeline indicates that the pick-up in fundraising activity is no longer confined to a handful of issuers. With more than ₹12,500 crore raised on Tuesday alone and several large transactions in the pipeline, total bond mobilisation in June could exceed ₹1 trillion, they said.
Sentiment in the bond market has improved following recent Reserve Bank of India (RBI) measures aimed at attracting foreign-currency inflows and supporting funding conditions. Market participants also pointed to reports of an interim understanding between the US and Iran and expectations that the Strait of Hormuz could progressively reopen for oil shipments. The decline in crude oil prices from recent highs has eased concerns over imported inflation, the current account deficit and pressure on the rupee, supporting demand for fixed-income assets.
Market participants said the pricing achieved by recent issuers indicates continued investor demand across the three-year, five-year and 10-year segments for high-rated credits. The fundraising by SIDBI, REC Ltd and HUDCO suggests borrowers are increasingly accessing the bond market rather than waiting for greater clarity on the interest-rate trajectory, crude oil prices or geopolitical developments.
“The recent correction in yields has opened a funding window for borrowers. Along with improved sentiment following RBI measures and lower crude oil prices, it has supported demand for high-rated bonds and accelerated issuance activity in the primary market,” said a dealer at a state-owned bank.
