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Informist, Monday, Mar. 2, 2026

 

By J. Navya Sruthi

 

MUMBAI - Corporate bond issuances in February fell 20% on year, the lowest in three years, as issuers stayed away amid volatile market interest rates. However, issuances picked up in the second half of the month, resulting in a month-on-month rise.

 

Companies raised INR 767.81 billion in February through 196 bond issuances, down over 20% from the INR 963.98 billion raised in the same month a year ago through 214 issues, according to data compiled by Informist. On a sequential basis, fundraising through corporate bonds rose nearly 14% in February. Fund-raising through AAA-rated companies accounted for more than 62% of the total, or INR 480.78 billion.

 

Market participants attribute lower bond issuance volumes in February to market uncertainty. Although yields on corporate bonds fell after the announcement of the India-US trade deal at the beginning of the month, they rose after the Reserve Bank of India failed to announce any measures to boost liquidity in the monetary policy on Feb 6. 

 

The yield on the benchmark three-year National Bank for Agriculture and Rural Development bond fell nine basis points to 7.09% immediately after the announcement of the trade deal. The yield on the five-year NABARD benchmark bond fell 13 bps to 7.21% and that on the 10-year bond fell 5 bps to 7.36%.

 

However, the trend reversed after the MPC left the policy repo rate unchanged at 5.25% and retained the policy stance at 'neutral'. The yield on the three-year NABARD bond rose to 7.15?ter the monetary policy. Similarly, yields on five-year and 10-year NABARD bonds also rose to 7.28% and 7.47%, respectively. This volatility in yields dissuaded companies from raising money from the corporate bond market in the first fortnight of the month.

 

"Yields have remained firm, reflecting a mix of global and domestic pressures rather than any single trigger," Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap, said. "Overall bond issuances have taken a hit, primarily because many banks did not tap the market as widely as participants had expected," he said.

 

The trend in January, when only one bank raised funds through corporate bonds, continued in February. Canara Bank was the sole bank to issue bonds in February. The bank raised INR 50 billion through 10-year Basel-III additional tier-II bonds maturing on Feb. 27, 2036. In February 2025, three banks had raised INR 75.52 billion.

 

Market participants said most banks were borrowing through short-term debt instruments such as certificates of deposit. Banks raised over INR 2.10 trillion through CDs in February, almost double the INR 1.12 trillion they had raised in January.

 

Most companies continued to meet their funding requirements through bank credit lines amid market volatility. "On the corporate side, more companies are opting for bank loans instead of bond issuances, as they are currently able to secure relatively attractive pricing from banks," Srinivasan said. "Most of these loans are linked to the EBLR (external benchmark lending rate), typically benchmarked to the repo rate, making pricing transparent and policy-sensitive."

 

Loans given by scheduled commercial banks rose nearly 14% on year to INR 204.32 trillion as of Feb. 15, according to the latest data. The weighted average lending rate on one-year fresh rupee loans of scheduled commercial banks was 8.67% in January, down from 9.32% a year ago.

 

These factors limited the corporate bond issuances during the first fortnight of the month. Companies raised 34% of total bond issuances of INR 767.81 billion in the first fortnight of February and the rest in the second-half of the month.

 

Yields on corporate bonds corrected in the second half due to the ample liquidity surplus in the banking system and then stayed largely stable. Systemic liquidity surplus stayed above INR 2 trillion at the end of February despite outflows of around INR 1.7 trillion for goods and services tax payments.  

 

By the end of February, yields on the three-year NABARD bond were back at 7.09%, while those on the five-year bond were 7.23%. Yield on the 10-year NABARD bond, however, rose to 7.41% from 7.36% at the start of the month.

 

SECTOR-WISE FUNDRAISING

Fundraising by public sector companies rose nearly 92% on month to INR 275.26 billion in February, with Small Industries Development Bank of India being the largest issuer. SIDBI raised INR 78.66 billion through bonds maturing in April 2029, at 7.22% in February.

 

NABARD, the second-largest issuer in February, raised INR 67.79 billion at 7.01% through bonds maturing on Mar. 16, 2029. Other public-sector issuers during the month included Power Finance Corp., REC, NHPC, and National Bank for Financing Infrastructure and Development.

 

In fact, NaBFID planned to raise INR 50 billion during the month through bonds maturing on Mar. 20, 2029, but scrapped the plan after investors demanded a higher coupon.

 

According to the bid books accessed by Informist, NaBFID received 61 bids totalling INR 46.88 billion, with the coupon ranging from 6.90% to 7.30%. The base issue of INR 10 billion was subscribed at a yield of 7.15%, below the market's expectation of 7.20% for the entire issue, including the greenshoe option. The state-owned company had expected to issue these bonds at 7.10%. The country's infrastructure financer raised INR 50 billion through a one-year CD at 6.95% towards the end of the month.

 

Fundraising by non-banking financial companies fell by over 9% on month to INR 186.29 billion in February. Realty and infrastructure sector companies raised INR 47.16 billion in February, compared with hardly any issuances in January. Real Estate Investment Trusts and Infrastructure Investment Trusts raised INR 27 billion in February, compared with nil in January. Others, including manufacturing, power, green energy, and technology companies, issued bonds worth INR 222.95 billion in February, down from INR 316.80 billion in January.

 

A. K. Capital was the top corporate bond arranger in February, helping mobilise over INR 67.35 billion, according to data compiled by Informist. It was followed by HDFC Bank, which arranged bond issuances of INR 64.42 billion. Other key arrangers included Axis Bank, HSBC, SBI Capital, Taurus Corporate Advisory Services, and Trust Investment.

 

MARCH ISSUANCES

Market participants expect issuances to increase in March as it is the last month of the financial year. The high surplus liquidity in the banking system and strong investor appetite are also expected to boost issuance in March.

 

"Looking ahead, March could see improved activity, as it is traditionally a year-end funding window," Srinivasan said. "Four to five banks may tap the bond market. We have already seen issuers like Canara Bank and PFC move quickly when yields appeared relatively less volatile. If this stability continues, more issuances could materialise in March."

 

Most state-owned companies and banks have already lined up issuances. SIDBI and Bank of Baroda will raise funds during the first week of March. On Friday, PFC raised INR 60 billion through the issuance of two bonds of different maturities and NABARD raised INR 50.55 billion through bonds maturing on Mar. 29, 2029. Since these bonds were allotted on Monday, they will be counted in March's tally.   

 

Although dealers and fund managers do not see any impact of the ongoing geopolitical tensions on yields at this point, they expect yields to spike if these tensions persist for more than a week.

 

"If the situation does not incrementally worsen, then nothing material will happen," said Killol Pandya, head of fixed income at JM Financial. "But if it escalates and crude prices rise above $90 (per barrel), then yields will spike, and we will see a significant impact on bond issuances," Pandya said.

 

Saturday, Israel and the US launched aerial attacks on Iran, killing the country's supreme leader, Ayatollah Ali Hosseini Khamenei. Iran has since retaliated against Israel and targeted US military facilities around the Persian Gulf region. Both sides have shown no signs of de-escalation in strikes as of late Sunday, with US President Donald Trump saying the world's largest economy and military is ready to attack Iran for weeks and will not stop until all objectives are achieved.  End

 

Edited by Saji George Titus

 

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