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Informist, Wednesday, Jul. 1, 2026

 

By Vaishali Tyagi and Meera Nair

 

NEW DELHI/MUMBAI – Fundraising through private placement of corporate bonds saw a strong year-on-year increase in June as companies rushed to capitalise on lower borrowing costs. Market participants said corporate bond issuances nearly doubled from May levels, driven by robust mutual fund inflows, prompting public sector undertakings and private entities to tap the market. Borrowing costs fell sharply, tracking the decline in crude oil prices and Indian government bond yields as optimism grew over a potential peace deal between the US and Iran.

 

Companies raised INR 1.32 trillion through 324 bond issues in June, up nearly 100% from INR 659 billion raised a year ago through 196 issues, according to data compiled by Informist. 

 

"Issuers are keen to capitalise on the reduced cost of funds and want to lock in the price they are getting right now... what if the situation changes again and yields go up?" said Amit Parmar, director of fixed income at Phronesis Capital. "Borrowers rushed to capitalise on the opportune time, as tight liquidity in the banking system and elevated yields had kept issuers on the sidelines in May."

 

The yield on the three-year National Bank for Agriculture and Rural Development bond was at 7.20-7.22% on Jun. 30, sharply down from 7.83-7.85% at the start of June. The yield on the five-year bond also fell to 7.23-7.27% from 7.80-7.85%, while the yield on the 10-year NABARD bond fell to 7.38-7.42% from 7.76%.

 

Short-term yields up to three years have fallen sharply, making it advantageous for state-owned entities to lock in funding at cheaper costs, participants said. Dealers said major issuances were in maturities up to seven years. "It's (rise in issuances) directly proportional to the fall in yields," a dealer at a state-owned bank said. "Short-term yields for tensors up to three years have drastically fallen, so that's why they (issuers) are coming up with new issuances in those tenures."  

 

Floating-rate bonds, the key theme in May with issuances of over INR 250 billion, dropped sharply to around INR 50 billion in June. Spreads on corporate bonds have compressed as geopolitical tensions eased and market conditions normalised, reducing demand for such structured bonds.

 

Dealers said public sector undertakings emerged as a key driver of supply alongside private non-banking financial companies in June. Banks continued to stay away from the corporate bond market during the month, dealers said. 

 

Fundraising by non-banking financial companies rose significantly to over INR 621 billion in June from INR 413 billion in May.

 

Construction companies, real estate firms and infrastructure finance companies borrowed slightly over INR 61 billion. Other sectors, including energy, insurance companies, and technology companies, raised around 97 billion, down from INR 107 billion, in May. Housing finance companies raised INR 132 billion, nearly three times the INR 44 billion in May, with LIC Housing Finance emerging as the largest housing finance issuer, raising INR 46 billion during the month, followed by Bajaj Housing Finance, which raised INR 25 billion. 

 

AAA-rated companies raised INR 733 billion in June, accounting for over 55% of the total, while AA+ to AA- rated companies raised around INR 185 billion, or nearly 14% of the total. In May, AAA-rated companies had accounted for 49% of the total funds raised, while AA+ to AA- rated companies had accounted for 29%.

 

In June, there was a significant rise in public sector undertaking issuances compared with May. Eight state-owned entities issued 14 bonds to raise INR 298 billion, compared with only two public sector undertakings, which raised INR 60 billion.

 

REC was the largest issuer among state-owned entities, raising over INR 124 billion through four bond issuances. Other notable issuers included Small Industries Development Bank of India, National Bank for Financing Infrastructure and Development, and Housing and Urban Development Corp, which drew strong investor demand at tight spreads. "Most state-owned companies got very good rates. NaBFID was the first to get good rates, and after that, most issuances were priced at tight spreads. Yields also came down, which further supported cheaper funding," Parmar said.

 

Unlike PSUs and NBFCs, banks largely stayed away from the domestic bond market in June. Market participants attributed this to comfortable capital positions and strong likely deposit inflows, including FCNR(B) deposits, following the Reserve Bank of India's concessional swap window. 

 

"Banks generally will get a lot of flows because all these FCNR(B) deposits will come to them only. So, they will not borrow right now," Parmar said. "When they have to maintain their deposits or they want to maintain tier-1, tier-2 capital, then they will come and borrow from the market."

 

On Jun. 5, RBI Governor Sanjay Malhotra introduced a facility to cover the full hedging costs for banks raising fresh three- to five-year foreign currency non-resident (bank) deposits till Sept. 30. He also announced a concessional foreign exchange swap facility till Sept. 30 to incentivise external commercial borrowings by public-sector undertakings. According to a median of a separate Informist Poll, the RBI's swap facility for banks is expected to draw around $43 billion in inflows. 

 

The capital to risk-weighted assets ratio is strong, at over 15% for most banks, a dealer at a state-owned bank said. "So, it's not logical to come up with issuances...that's why you will not see banks aggressively issuing bonds in this quarter also," the dealer said. 

 

After a dry spell in fundraising through external commercial borrowings, activity picked up in June. Dealers said a few state-owned entities and private companies issued dollar bonds following the RBI's concessional swap window. 

 

"ECBs have also risen after the RBI's swap window," Parmar said. "If borrowers get lower rates overseas, they will definitely opt for that." 

 

Axis Bank, Power Finance Corp., HDFC Bank, and State Bank of India were among those that have tapped overseas markets for funds. Bank of Baroda, HUDCO, SIDBI, and Capri Global are also expected to raise funds from foreign markets, market participants said.

 

Axis Bank was the top corporate bond arranger in June, helping mobilise over INR 99 billion, according to data compiled by Informist. It was followed by A.K. Capital Services, which arranged issuances worth around INR 96 billion. Trust Investment Advisors mobilised INR 68 billion, while HDFC Bank arranged issuances worth INR 46 billion. Other key arrangers included ICICI Bank and Taurus Corporate Advisory Services.

 

In Apr-Jun, bond issuances fell by over 17% compared with the corresponding quarter last year, due to low issuances in April and May amid elevated yields. During Apr-Jun, a total of INR 2.37 trillion was raised through 746 issuances, compared with INR 2.8 trillion through 674 bonds in the same period last year.

 

ROAD AHEAD

Dealers expect the momentum to sustain into the Jul-Sept quarter and issuances to remain strong as long as yields stay low and liquidity remains comfortable, unless global events disrupt sentiment.

 

"It (rise in issuances) should continue," Parmar said. "Unless there is some global event which will impact the market negatively and oil goes for a toss." 

 

However, a few market participants said issuers still await clarity on a peace agreement between the US and Iran before planning any issuance.

 

"They (issuers) will definitely capitalise on the fall in yields. So, there will be many more issuances compared to last quarter," the dealer at the state-owned bank said. "April and May were mostly dry...If you compare the numbers with Q1 (Apr-Jun), there will definitely be more issuances in Q2 (Jul-Sept)."

 

Separately, urban local bodies are looking to tap the bond market, aided by government incentives. Vadodara Municipal Corp. may raise up to INR 2 billion through a five-year blue bond, likely filing documents in July.  End

 

Edited by Akul Nishant Akhoury

 

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