Individual investors seeking yield in India snap up risky firms' debt

Individual investors in India are rushing to buy corporate bonds from weaker borrowers, taking bigger risks to boost returns in a debt market dominated by institutional investors.

Company note sales to retail investors have more than doubled from a year earlier to Rs 6,720 crore so far in 2021. 

A further Rs 3,100 crore of bonds that individuals can buy into are being marketed right now, and another Rs 5,000 crore of such debt is in the pipeline including a deal from India Grid Trust announced late last week. Many savers desperate for yield are likely to jump at the chance to buy such notes. It’s because they are struggling with inflation pressure even as bank deposit rates have dropped. 

Policy makers have long sought to deepen the local corporate bond market, as one of the world’s worst bad debt piles makes banks reluctant to lend and institutions avoid all but the highest-rated notes. But public debt offerings that individuals can take part in only totalled Rs 7,100 crore last year. The pickings for retail investors also tend to be riskier: While about 66 per cent of local-currency notes privately placed to professional investors so far in 2021 carry top rankings, only one of the nine issues being marketed or in the pipeline has a AAA rating.