NBFCs eye Rs 5,000 crore through bond issuances over next one week

Sidbi raises Rs 8K cr, single-largest by a non-bank so far in FY25

Several non-banking financial companies (NBFCs) plan to raise over Rs 5,000 crore through bond issuances in the next one week. State-run lender Bank of India (BoI) also plans to raise up to Rs 2,500 crore via issuance of Tier-II bonds on Wednesday.

On Tuesday, Small Industries Development Bank of India (Sidbi) raised Rs 8,000 crore through bonds maturing in four years and five months at a coupon of 7.34 per cent. The coupon was set better than the market expectation of around 7.40 per cent, said dealers.

“The coupon was better than market expectations, the market was looking at somewhere around 7.40 per cent. The rate came down because a five-year Sidbi paper was dealt at 7.32 per cent in the secondary market,” said a dealer at a State-owned bank. “Public sector banks and mutual funds are expected to be the major bidders,” he added.

As bank loans have become more expensive due to the Reserve Bank of India (RBI)’s implementation of new risk-weight norms introduced last year, NBFCs have accelerated their borrowings through corporate bonds and other instruments.

NBFCs have raised Rs 88,340 crore in the current quarter so far through corporate bonds as compared to Rs 84,135 crore in the first quarter of FY25.

“Sidbi’s Rs 8,000 crore bond issuance, the single-largest mobilisation by a non-bank entity this financial year, saw bids exceeding Rs 11,000 crore, securing the full amount at 7.34 per cent. Strong demand for AAA-rated bonds, driven by expectations of RBI rate cuts and tight banking liquidity, underscores growing investor interest. With marginal cost of funds based lending rate (MCLR) still high, more corporates are turning to bonds for cheaper financing. The recent Fed rate cut has further fuelled hopes for RBI easing, boosting demand for corporate bonds. Investors do prefer primary market compared to secondary market, which meets their large investment requirements at desired levels,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.

On Wednesday, Mahindra & Mahindra Financial Services (M&M Financial) plans to raise funds through two issuances. The first is a planned sale of Rs 750 crore in 10-year subordinated debt at 8.24 per cent, while the second seeks bids for up to Rs 1,250 crore of bonds maturing in December 2027, offering a yield of 8.01 per cent.

Bajaj Finance is preparing to sell at least Rs 500 crore of 10-year bonds at a yield of 7.70 per cent, with the issuance expected next week.

Tata Capital Housing also plans to tap the market on the same day with Rs 250 crore of its July 2034 bonds. LIC Housing Finance is seeking bids for up to Rs 3,000 crore of bonds maturing in August 2034, and BoI plans to raise Rs 2,500 crore through the sale of 10-year Tier-2 bonds.