More Stories

Informist, Thursday, Mar. 13, 2025

 

By Sachi Pandey and Vaishali Tyagi 

 

MUMBAI – Fundraising through private placement of corporate bonds in February rose 22% from a month ago, driven by public sector companies rushing to complete their borrowing targets for the current financial year ending Mar 31. Companies and financial institutions raised INR 963.98 billion through 214 bonds in February compared with INR 789.50 billion through 210 bonds in January, data sourced from the National Securities Depository and compiled by Informist showed. 

 

Public sector companies contributed over half of the total fundraising in February. These entities raised INR 488 billion in February, up from INR 267.88 billion in January. Among them, National Bank for Agriculture and Rural Development was the largest issuer, raising INR 134.60 billion through three bond offerings, followed by Power Finance Corporation, which raised INR 112.85 billion across five bond issues.

 

The surge in bond issuances last month was despite a rise in yields as state-owned issuers moved ahead with their plans, primarily due to the urgency of meeting their borrowing targets. In preceding months, some of these companies had been putting off their bond issuances in anticipation of an interest rate cut by Reserve Bank of India. The central bank's monetary policy committee lowered rates by 25 basis points at its meeting held on Feb 5-Feb 7.

 

"Everyone wanted to tap the market post rate cut to meet their borrowing targets but at the later end (of the month) issuers had to shelf little extra spreads due to impact of SDL (state development loans) borrowing & Trump trade policy announcement which created uncertainty in markets," Umesh Khandelwal, Chief Business Officer at Tipson Group told Informist.

 

However, corporate bond issuances in February saw a 5?cline from the corresponding period a year ago when companies raised INR 1.02 trillion through 312 bond offerings. Explaining the year-on year drop, Khandelwal said, "The market situation is different this year compared to last year. While there was more optimism in 2024, now the market is facing a bearish outlook due to global uncertainties, especially with Trump's influence and the rupee's depreciation." 

 

Meanwhile, February saw modest issuances by banks in the corporate bond market. Only three banks issued bonds, cumulatively raising INR 75.52 billion, down nearly 16% from the INR 90 billion raised in January. Punjab National Bank led the pack, raising INR 29.50 billion through a 10-year infrastructure bond with a coupon of 7.34%, followed closely by the Bank of India, which raised INR 26.90 billion through a similar bond issue.

 

Non-banking finance companies were notably absent from the bond market in February, raising just INR 149.33 billion, a slight increase from INR 112.94 billion in January. On the other hand, housing finance companies saw an uptick in activity, raising INR 116.13 billion in February, up from INR 92.5 billion the month before.

 

Infrequent issuer, Vedanta Ltd. tapped the bond market last month, raising INR 75.00 billion through two bond offerings. Sangvi Lifespace offered the highest monthly coupon at 18% in February for a bond due in 2030.

 

Participation from various investor categories was mixed. While major life insurance companies and provident funds were more or less absent from the market last month, the demand for bonds remained from insurance companies, pension funds, and mutual fund houses. Merchant bankers also stepped in to fill the gap between demand and supply from time to time.

 

YIELDS ON THE RISE

The corporate bond market saw fluctuating yields, with most of the movement skewed toward the upside. After a brief dip following the budget announcement in the first week, yields climbed in the rest of the month. 

 

While short-term bond yields experienced an increase of 7-10 basis points, longer-term bonds saw a more pronounced jump, with yields rising by over 15 bps. Despite this upward movement in long-term yields, the majority of issuances in February remained concentrated in this segment, with over 65% of the total funds raised coming from bonds maturing in more than five years.

 

The rise in yields was primarily driven by the tight liquidity conditions in the banking system, "Issuances have picked up, but one of the major impediments has been the tight liquidity. For almost the entire month of February, liquidity remained extremely tight. Even though the RBI infused some liquidity, currency pressures and overall financial conditions kept the environment tough for bond issuers and for overall market," Soumyajit Niyogi, Director, India Ratings & Research said.

 

Although the MPC unanimously decided to cut the policy repo rate, it disappointed markets by maintaining a 'neutral' stance. Market participants had hoped that the rate-setting panel would change the policy stance to 'accommodative' and give some guidance on liquidity. 

 

However, the impact of the rate cut did not transmit into fixed income and money market last month as the banking system liquidity continued to remain in a deficit. On an average last month, the banking system liquidity remained in a deficit of INR 1.50 trillion. This was despite the central bank infusing flows through dollar/rupee buy/sell swaps, open market operations and long-term variable repo operations since Jan. 27. There were moments when liquidity conditions appeared to improve, but in those days too it failed to bring the corporate bonds yield down.

 

The excess supply of bond issuances from public sector entities further pushed up yields. With so many issuances lined up, investors had plenty of options to choose from, which led them to demand higher yields on top-tier bonds. As a result, companies were compelled to issue bonds at elevated rates, as there was limited demand for lower-yielding offerings.

Looking ahead, the market environment is expected to remain similarly challenging. March is set to be another busy month for corporate bond issuances, with companies racing to meet their borrowing targets before the financial year ends on Mar. 31. There is a broad consensus among market participants that bond yields will continue to rise, and issuances will remain heavy throughout the month as companies seek to secure funding amid tight financial conditions.  End

 

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.