Informist, Tuesday, Apr. 8, 2025

By Ashna Mariam George and Sachi Pandey

MUMBAI – The month of March witnessed an impressive surge in corporate bond fundraising, with issuers flocking to the market to borrow funds before the end of the financial year, arrangers said. Fundraising through corporate bonds soared 34% on month as companies, state-owned entities, and banks rushed to meet their requirements. According to data from the National Securities Depository and Informist, a total of INR 1.29 trillion was raised through 291 bond issues in March. This marked the highest level of monthly bond fundraising in the financial year ended Mar. 31. However, the fundraising in March was 8% lower from a year ago, when a sum of INR 1.40 trillion was raised through 380 bonds.

Market participants attributed the surge in bond issuances in March to issuers' requirement to meet their borrowing targets, coupled with the Reserve Bank of India's 25-basis-point repo rate cut in February. "Usually, March will always have a high borrowing. Also this March was slightly different because there was a real rate cut this time and rates were lower, so a lot of people who were waiting for the rates to cool off have done that borrowing," Ajay Manglunia, managing director and head of fixed income at InCred Capital Financial Services Pvt. Ltd., said. The lower borrowing costs provided an opportune moment for issuers to raise funds, especially those who had been waiting for more favourable market conditions.

Notably, corporate bond fundraising surpassed INR 10.00 trillion for the second consecutive year in 2024-25 (Apr-Mar). Data from the National Securities Depository and Informist showed issuers raised INR 10.49 trillion in FY25, a 4.4% increase compared to the previous financial year. "Fundraising in FY25 was higher for multiple reasons, after General Election there was more government spending, and private entities also borrowed to boost spending on infrastructure," Haresh Desar, vice-president, Ekam Advisors Pvt. Ltd., said. "Also SEBI (Securities and Exchange Board of India) has eased out listing reforms, making it easier to tap the bond market for raising money."

Explaining the decline in fundraising in March from a year ago, Pallavi Bajaj, founder of Aurifi Ventures LLP., said, "Even though the economy is recovering, investors maintain a conservative outlook regarding growth. Also, NBFCs (non-banking finance companies), which is major sector of corporate bond issuers, are focused on asset quality and thereby are very selective on borrowing." According to an Informist analysis, the December quarter earnings for non-banking finance companies showed persisting pressure on asset quality and credit offtake. This would have lowered demand for borrowing from these companies.

Non-banking finance companies raised only INR 120.78 billion in March, down from INR 149.33 billion they had raised in February. Fundraising by housing finance companies also declined in March to INR 111.75 billion from INR 116.13 billion in the previous month.

The lion's share of the fundraising in March came from public sector companies which raised INR 581.70 billion, up from INR 487.98 billion in February. Among these, the National Bank for Agriculture and Rural Development was the largest issuer and raised INR 140.00 billion through two bond offerings. Several public entities such as Power Finance Corp., REC Ltd., Small Industries Development Bank of India, and Housing and Urban Development Corp., among others, tapped the corporate bond market in March.

In contrast to public sector entities, banks continued to be relatively inactive in the corporate bond market during March. Only two banks--Canara Bank and AU Small Finance Bank--raised funds through bond issuances. Canara Bank raised INR 40 billion through tier-II bonds, while AU Small Finance Bank raised INR 7.7 billion through a 10-year bond.

YIELDS ON THE DECLINE
Corporate bond yields fell over 25 basis points in March after being higher for most of the quarter. The yield on three-year papers ended down 28 bps at 7.27%, while the yield on five-year papers ended 27 bps lower at 7.20%. Yield on bonds maturing in 10-years also ended down 26 bps in March.

This decline was driven by a surge in investor demand, as many rushed to deploy their funds before the close of the financial year. The RBI's measures to boost liquidity in the market provided additional support, which further drove down yields.

The central bank bought INR 1.45 trillion of gilts in March through three open market operations, and will buy gilts worth INR 8.00 billion in April. The OMO announcement boosted expectation of a 25-basis-point rate cut by the RBI's Monetary Policy Committee Wednesday. Market participants also expect a stance change at the policy meeting, along with the repo rate being lowered to 6.00%.

According to RBI data, the net liquidity injected by the central bank--a proxy for the systemic liquidity--was in surplus of INR 893.99 billion as on Mar.30, against a deficit at the start of March, thanks to the OMO purchases and dollar/rupee buy/sell swap auctions.

In FY26, market players see increased participation in the corporate bond market with more issuers tapping the market to raise funds. "We expect a 15-20% growth in the overall borrowing for the year...earlier only 'AA' and above papers were getting the market attention, but now even lower rated papers are also coming to the market and there is demand for those papers, so we can see a lot of new names coming to the market," Manglunia said.

"First quarter (Apr-Jun) will be a good one for fundraising through corporate bonds, as we are expecting another rate cut and better liquidity conditions," Bajaj added. End

Edited by Deepshikha Bhardwaj

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