Hudco cancels ₹3,000 cr bond issue as investors demand higher yields

Hudco scrapped its Rs 3,000 crore bond issue after investors sought higher yields, reflecting hardened corporate bond rates in line with rising government securities

State-owned Housing and Urban Development Corporation (Hudco) on Tuesday cancelled its planned bond issuance after investors demanded higher rates than the company was willing to offer, according to sources familiar with the matter.

 

Hudco had planned to raise Rs 3,000 crore through the bond issuance, comprising a base issue of Rs 500 crore and a green shoe option of Rs 2,500 crore. Had Hudco taken the full amount, the cut-off for the issue would have been 6.88 per cent, sources said.

 

“They (Hudco) didn’t like the response. In light of higher yields for government bonds, investors were willing to buy at better spreads,” said Ajay Manglunia, Executive Director at Capri Global Capital Ltd. 

The domestic corporate bond market is currently in a wait-and-watch mode due to multiple uncertainties amid supply pressures from state bonds and central government bonds. While yields have hardened over the past month, corporates appear reluctant to offer higher coupon rates. 

 

The rise in corporate bond yields mirrors the upward trend in 10-year government securities, which have increased from 6.3 per cent at the beginning of August to 6.62 per cent as of Tuesday. The increase has been driven by expectations of additional central government borrowing for fiscal deficit management following a GST rate cut, as well as global risks such as US tariffs and trade tensions.

 

“Bond yields have hardened unexpectedly. The rate they were getting was around 6.88–6.89 per cent, which they were not ready to pay,” said a dealer at a state-owned bank.

 

As a result, Indian corporates, after raising a record Rs 4.07 trillion through debt in the first four months of the current financial year (FY26), have slowed down in August, with no major issuances so far amid elevated yields.