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Informist, Thursday, Oct. 1, 2026

 

By Vaishali Tyagi 

 

NEW DELHI – Fundraising through private placement of corporate bonds rose sharply on month in September as companies front loaded capital amid fears of rising borrowing costs. Market participants are expecting the Reserve Bank of India's rate-setting panel to hike the repo rate by 25 basis points to 5.50% on Wednesday in its October policy, after the US Federal Reserve raised rates in mid-September, dealers said.

 

Companies raised INR 1.27 trillion through 367 bond issues in September, up nearly 80% from INR 706.93 billion raised a month earlier through 313 issues, according to data compiled by Informist. Borrowing rose about 117% year-on-year.

 

The sharp rise in issuances was driven by expectations that domestic yields would rise further, dealers said. Market participants started pricing in a 25-50 bps rate hike by the RBI as early as the start of September, which pushed issuers, especially non-banking finance companies, to tap the market early to lock in funds at lower costs. "Yes, we can say two things were there, quarter ending (Jul-Sept end) as well as the rate hike expectations, people are having the fear that the rate will be hiked by 25 to 50 bps...if you see today and one month back, then you can compare the pricing," a dealer at big state-owned bank said.

 

Dealers said the rise in the US Treasury yields also weighed on sentiment of corporate bond investors. The 10-year US Treasury yield moved higher following the US Fed's rate hike and comments by Chair Kevin Warsh flagging persistent risks of higher inflation, which impacted domestic yields, they said. Brent crude oil prices remained volatile amid prolonged US-Iran war, which also kept yields elevated. "Actually... US (US Treasury yields) itself were also going up, and traders were having sentiment that the rate will be hiked by 25 bps... so definitely it is pushed our domestic (government bond) yields high... and at the same, the crude prices started going in the latter half of the month," a dealer at a large brokerage firm said. 

 

The US Federal Open Market Committee voted unanimously to raise the benchmark rate by a quarter point to a range of 3.75% to 4.00%. The Fed's so-called dot plot, which shows policymakers' projections for interest rates, pointed to one more hike this year. Investors are now assessing how quickly the Fed may tighten further as policymakers contend with broader inflationary pressures. 

 

The yield on the three-year National Bank for Agriculture and Rural Development bond was at 7.88-7.90% on Sept. 30, sharply higher from 7.68-7.74% at the end of August. The yield on the five-year bond also rose to 7.85-7.87% from 7.73.-7.75%, while the yield on the 10-year NABARD bond surged to 7.90-7.92% from 7.70–7.75%. 

 

"In terms of issuances, banks wanted to deploy the flows they received through FCNR(B) deposits within a specific time frame. So most of the NBFC issuances in September happened because of these FCNR(B) flows being with banks, and seeing that demand coming from them, issuers wanted to take advantage of the opportunity," Abhishek Jha, senior manager at HDB Financial Services said. 

 

On Jun. 5, the RBI announced several measures to attract foreign inflows, including a special concessional swap facility for external commercial borrowing, overseas foreign currency borrowing and foreign currency non-resident (bank) deposits. Under the scheme, PSUs through authorised dealer banks could raise external commercial borrowing, or overseas foreign currency borrowing in dollars, with maturity of over three years and up to five years, which could then be swapped with the RBI, which would bear the swap cost. Similarly, banks could mobilise fresh FCNR (B) deposits with a tenor of three-five years in US currency, with the option to swap them with the RBI. This basically eliminated the hedging costs for the banks, making it more attractive to raise ECBs and FCNR (B) deposits. Banks mobilised $133 billion through FCNR(B) deposits between Jun. 8 and Aug. 31, much higher than initial expectations.

 

Fundraising by non-banking financial companies eased to around INR 300.34 billion in September from over INR 242.23 billion in August, due to a sharp rise in yields. The market saw many new entrants that are not regular issuers, particularly non-banking financial companies. Even some lower-rated NBFCs tapped the market to raise funds. IIFL Finance, Mahindra & Mahindra Financial Services, Mas Financial Services, and Motilal Oswal Financial Services were among the largest borrowers.

 

However, fund-raising by housing finance companies fell marginally to INR 51.50 billion from INR 62.62 billion in August, with Tata Capital Housing Finance emerging as the largest issuer, raising INR 17.25 billion through September 2029 bonds, followed by LIC Housing Finance, which raised INR 10 billion. Construction and real estate companies cumulatively raised INR 122.91 billion. Insurance companies tapped the market to raise INR 7.86 billion. Others, including brokerage firms, renewable energy and manufacturing companies, raised nearly INR 223.73 billion in September. Infrastructure finance companies raised INR 52.5 billion, higher from INR 31.70 billion in August. 

 

Large conglomerates like Reliance Industries also tapped the market. Reliance Industries raised INR 250 billion through domestic bond issuances in September, including INR 130 billion 10-year bond, in a bid to lock in long-term funding amid rising borrowing costs and expectations of a potential rate hike.

 

Other major companies such as Vedanta, which raised INR 35 billion in September via bonds, Larsen & Toubro, and Godrej Industries also tapped the corporate debt market. Municipal bonds worth nearly INR 2.5 billion were also issued. Two municipal bodies, Patna Municipal Corporation and Nagar Nigam Moradabad, raised funds from the market.

 

Companies rated "AAA" raised INR 658.45 billion in September, accounting for nearly 52% of the total funds raised, while companies rated "AA+" and "AA-" raised around INR 391.99 billion, or just around 31% of the total. In August, "AAA"-rated companies accounted for over 63% of the total funds raised, while "AA+" and "AA"-rated companies accounted for nearly 9%. 

 

YES Bank was the top corporate bond arranger in September, helping mobilise INR 125 billion, according to data compiled by Informist from exchanges. It was followed by ICICI Bank, which arranged issuances worth around INR 88 billion and Trust Investment mobilised around INR 63.50 billion. Other key arrangers included HDFC Bank Ltd., A.K. Capital Capital, SBI Capital and Axis Bank Ltd. A.K. Capital was the top corporate bond arranger in August, helping mobilise INR 146.29 billion worth of funds. 

 

Banks largely stayed on the sidelines in terms of bond issuances in September as they were flush with FCNR(B) inflows, merchant bankers said. However, the issuances rose from August, which saw no issuances at all. Banks raised only around INR 28.29 billion in September, compared to no issuances in August. Canara Bank was among the few lenders to tap the market, raising INR 20.42 billion through Basel III-compliant additional tier-I, perpetual bonds. Other issuers included Equitas Small Finance, Utkarsh Small Finance Bank, and Shivalik Small Finance Bank. 

 

Rather than bonds, banks preferred to manage funds through certificates of deposits, largely due to FCNR(B) inflows and also because of the impending rate-hike cycle and global volatility. "Amid such an uncertain environment, banks preferred short-term instruments to bridge capital gaps, tapping the certificate of deposit market instead of locking in funds at higher rates through bonds," the dealer quoted above said.

 

Banks issued CDs worth INR 1.11 trillion in September, up nearly 63% on month and 67% on year, according to data from Clearing Corp. of India Ltd. collated by Informist.

 

In September, public sector undertakings raised INR 219.58 billion, sharply higher than INR 158.98 billion raised in August. REC Ltd. continued to be the largest issuer for the second consecutive month, raising INR 81 billion in September through four bonds, while Small Industries Development Bank of India raised INR 58.89 billion. Power Finance Corp. borrowed INR 52.69 billion through three bonds in September, higher than INR 30 billion raised in August. Other public sector issuers included Housing and Urban Development Corp., Indian Railway Finance Corp., Nabkisan Finance, and Power Grid Corp.  

 

Market experts said borrowing by public sector companies typically picks up from Jul-Sept onwards. "If you compare their requirements...historically PSUs (public sector undertaking) borrow less in Q1 (Apr-Jun) as compared to Q2 (Jul-Sep) and Q3 (Oct-Dec)... So you will generally see higher borrowing in this quarter. And going forward, it will increase gradually," a dealer said.

 

Earlier, in July and August, several state-owned entities had raised funds through external commercial borrowings to avail of the RBI's special scheme window, market participants said. However, the borrowing from overseas completely dried up in September, as global yields moved sharply higher, and the rupee has depreciated, prompting several issuers to scrap those plans, at least for now, they said. 

 

ROAD AHEAD
Dealers said issuances could gather pace in October as credit demand typically improves ahead of the festive season, which may push banks and non-bank lenders to tap the domestic bond market. However, much will depend on how global yields behave.  

 

For now, activity has thinned ahead of the RBI policy meeting due next week. While a rate hike is largely priced in, traders are awaiting clarity on the decision and the governor's commentary for cues on inflation, growth and liquidity. "Market participants are on the sidelines as sentiment remains highly volatile," a fund manager at a large mutual fund house said. "Once there is clarity, fundraising by non-banking financial companies and banks is expected to rise to meet capital requirements and disbursements. People are sitting on the fence as sentiments are too volatile... Everyone is waiting for policy day, and then they will decide what to do next."

 

On the global front, market participants said there is a lot of uncertainty right now, with conflicting signals on the US-Iran situation. "At times, comments from the US suggest negotiations with Iran are underway, while Iran denies any such talks, leading to a lot of information manipulation, Jha said. "I feel this is the new normal." Any positive news briefly improves market sentiment, but yields move back up soon after, he said, adding that uncertainty is likely to persist. But for now, the key focus will be on the RBI's commentary and guidance. End

Edited by Deepshikha Bhardwaj

 

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