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Informist, Thursday, Apr. 2, 2026

 

By Vaishali Tyagi and J. Navya Sruthi

 

NEW DELHI/MUMBAI - Corporate bond issuances in March were the highest in 11 months and up 29% on month, thanks to companies that rushed to the market to meet their funding requirements before the end of the financial year, which has been the case traditionally, market participants said. The on-month rise was driven by an increase in issuances by banks and public sector entities.

 

However, corporate bond issuances declined on a yearly basis, mainly because of higher yields due to a surge in crude oil prices after the military conflict in West Asia. Dealers said fundraising also remained low because state-owned companies continued to scrap their issuances as investors asked for higher coupons.

 

Companies raised INR 989.96 billion in March through 275 bond issuances, down 24% from the INR 1.29 trillion raised in the same month a year ago through 291 issues, according to data compiled by Informist. On a sequential basis, fundraising through corporate bonds rose over 29% in March from INR 767.81 billion a month ago.

 

"Usually, March will always have high borrowing to meet their year-end requirement...some companies also do front-load as they have to wait for board approval to raise funds in the new financial year," Soumyajit Niyogi, director, India Ratings & Research, said, attributing the surge to issuers rushing to meet borrowing targets.

 

Overall fundraising volume could have been even higher in March, but volatility in the market, driven by the war in West Asia, kept a lid on the rise in bond issuances, he said.

 

The yield on the benchmark three-year National Bank for Agriculture and Rural Development bond rose 54 basis points to 7.62% in March. The yield on the five-year NABARD benchmark bond rose 47 bps to 7.70%, and that on the 10-year bond rose 35 bps to 7.74%. Meanwhile, the yield on the 10-year benchmark government bond rose 37 bps in March and closed at 7.0345%, the highest since Jun. 4, 2024. The yield on the 6.01%, 2030 bond rose 55 bps to 6.7732% in March.

 

Yields on corporate bonds surged, tracking the rise in government bond yields. Government bond yields shot up as Brent crude futures jumped over 20% to near $120 per barrel. The surge in crude oil prices and the fall in the rupee as the military conflict in West Asia escalated sparked gilt selling, driven by fears of rising inflation and a widening current account deficit.

 

Along with firm crude oil prices, liquidity conditions in the domestic market also added to higher yields in March. After remaining at INR 2 trillion surplus for the first fortnight of March, the liquidity surplus turned into a deficit due to outflows of around INR 3.5 trillion for corporation tax payments in advance by companies and goods and services tax payments. 

 

In fact, the liquidity deficit as of Mar. 21, INR 659.36 billion, was the highest since Dec. 29. To support the banking system, the RBI conducted seven variable rate repo auctions of varying tenures and infused INR 3.58 trillion of transient liquidity into the banking system in the second fortnight of March, which had just nine working days.

 

"Why would they (companies) raise (funds) when yields are over 7%? We can see from the number of issuances scrapped," a senior dealer at a major state-owned bank said on condition of anonymity. National Bank for Agriculture and Rural Development and REC Ltd. scrapped their bonds in March, and Small Industries Development Bank of India withdrew bond issuances twice in March. 

 

While this has been the story of issuers, the story is different on investors' side. "Investors prefer fixed income (instruments) at the time of uncertainty," a dealer at a state-owned insurance company said on condition of anonymity. "There was firm demand from LIC, New India (Assurance), EPFOs (Employees' Provident Fund Organisation), other long-term investors for primary issuances by PSUs (public sector undertakings)," the dealer said.

 

"Given the uncertainty, investors did not know where to set up the equilibrium, hence they bid for higher yields," the dealer at the state-owned insurance company said. "But NABARD and others who scrapped were expecting levels around 7.10%, which is not possible at current times," the dealer said, adding that there was more than enough participation and demand for bonds issued by state-owned companies. 

 

Fundraising by AAA-rated companies fell in March, while that by AA+ rated and AA- rated ones rose. Fundraising through AAA-rated companies accounted for more than 53% of the total, or INR 529.44 billion, while AA+ to AA- rated companies raised around INR 290 billion, or nearly 30% of the total. Whereas in February, AA+ to AA- rated companies raised INR 73.15 billion or just 10% of the total, while those with the highest rating raised INR 480.78 billion, or more than 62% of the total for the month.

 

"We're seeing increased participation from papers rated below AAA. Earlier, only AAA and above papers were getting market attention, but now even lower-rated papers are coming to the market, and there's demand for those papers," a merchant banker said, adding that investors' appetite for riskier assets is growing. 

 

SECTOR-WISE FUNDRAISING

Public sector companies raised INR 257.20 billion in March, down 7% from the previous month. Despite scrapping one bond issue, NABARD managed to be the largest issuer in March, by raising INR 123.20 billion through two bonds. National Bank for Agriculture and Rural Development borrowed INR 50.55 billion through three-year bonds maturing on Mar. 29, 2029, at 7.10% and INR 72.65 billion at 7.44% coupon through bonds maturing on Jul. 17, 2029.

 

Power Finance Corp. Ltd., the second-largest issuer in March, raised INR 60 billion through the issuance of two bonds of different maturities. The power sector financier raised INR 30 billion through two-year bonds, at a coupon of 6.96%. The company raised another INR 30 billion by issuing 10-year bonds at a coupon of 7.31%. Other state-owned entities, including Export-Import Bank of India, raised INR 40 billion through five-year bonds at a coupon of 7.23%. The other major issuer was REC, which raised INR 30 billion through five-year bonds at 7.19% in March.

 

Fundraising by non-banking financial companies fell by over 13% on month to INR 211.45 billion in March. Insurance companies raised INR 7.8 billion in March. Others, including Infrastructure Investment Trusts, Real Estate Investment Trusts, manufacturing, power, green energy, and technology companies, issued bonds worth INR 361 billion in the month, up from INR 249 billion in February.

 

Banks raised INR 141.26 billion in March, a significant jump from February, with several state-owned lenders tapping the market. In contrast, Canara Bank was the sole bank to issue bonds in February and raised INR 50 billion through 10-year Basel-III additional tier-II bonds.

 

In March, Bank of Baroda led the pack by raising INR 100 billion through seven-year green infrastructure bonds at 7.10%. State Bank of India followed with INR 60.51 billion through 10-year Basel-III bonds at 7.05%. Indian Bank raised INR 50 billion through 10-year infrastructure bonds at 7.15%, and Union Bank of India raised INR 30 billion at 7.16%, with the same maturity period.

                

Barclays Plc. was the top corporate bond arranger in March, and helped mobilise over INR 95 billion, according to data compiled by Informist. It was followed by SBI Capital Markets, which arranged issuances of INR 60.5 billion. Other key arrangers were DBS Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., and Hongkong and Shanghai Banking Corp.

 

AFFORDABLE CDs, LOANS

The trend seen in February, when state-owned companies scrapped their bond issuances and raised funds through short-term instruments, continued in March. Small Industries Development Bank of India raised INR 134 billion through three commercial papers and one certificate of deposit in March after scrapping its bonds twice.

 

Even though NABARD scrapped its bond issuance only once in March, it was active in the short-term debt market. The state-owned company raised over INR 477 billion in March by issuing short-term debt instruments. After its debut in the short-term debt market in February, the National Bank for Financing Infrastructure and Development raised INR 43 billion through two CDs in March.

 

Companies were also opting for bank loans to fund their requirements instead of issuing corporate bonds. "Most entities with AA+ rating or even lower are facing problem when it comes to corporate bonds," a senior dealer at a private sector bank said. "So these are preferring bank loans, which is just 150 bps over G-Sec yields, after rate cut cycle," the dealer said. 

 

The marginal cost of funds-based lending rate for three years by the State Bank of India is 8.80%, while the yield on the benchmark three-year NABARD is 7.62%. The yield on Bajaj Finance Ltd.'s Jun. 26, 2028 bond, which is a AAA-rated entity, was at 7.38%.

 

APRIL-JUNE

Looking ahead, market participants expect fundraising to remain subdued in April and the first quarter. "If the war situation stabilises and yields come down, then market issuances will pick up," the merchant banker said. "If the yield in the market stays high, the volume of issuance will not go up even in first quarter of new financial year," the banker said. 

 

Market participants said oil marketing companies are likely to tap the corporate debt market in April to raise funds, as their earnings are expected to take a hit in the first quarter of 2026-27 (Apr-Mar) due to a surge in crude oil prices amid the ongoing military conflict in West Asia. The companies could see a dent on their revenue, with potential further declines if the war continues to disrupt gas and oil supply. 

 

The corporate bond spread over government securities has widened to over 80 basis points, up from an average of 50-60 basis points. "The market will come to an acceptance, and issuers will have to adjust to the new rate," a banker said. 

 

In Jan-Mar, fundraising fell to INR 2.44 trillion from INR 3.86 trillion reported in the corresponding quarter last year. Corporate bond fundraising fell in the last quarter as the second half of the financial year saw rising yields, and investors were not comfortable locking in at high base spreads, a dealer at a state-owned bank said.  End

 

US$1 = INR 93.10

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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