Fundraising by India Inc through bonds go past Rs 1 trillion in February

Despite rising yields, firms rush to raise funds, pushing FY25 issuances to a new record

Despite elevated yields, fundraising by corporates through bonds topped Rs 1 trillion in February after a relatively muted January, owing to turmoil in the market, triggered by geopolitical events.

  In February, corporates mopped up Rs 1.07 trillion through bonds from the debt capital market with 197 issuances. This was 47 per cent higher than Rs 72,811 crore raised in January, data by Prime Database showed. So far in FY25 (until February), corporate bond issuances have reached Rs 9.6 trillion and are expected to surpass the Rs 10.19 trillion raised in FY24 by the end of this financial year. The amount raised in FY24 through bonds was the highest since FY20, data showed.

  In FY25, fund raising through bonds by corporates topped Rs 1 trillion in four months — July, September, December, and February.  Despite a rate cut in February, the yields on corporate bonds moved up due to oversupply, including state government securities, and tight liquidity conditions.

  According to a SBI Economic Research report, state government securities and corporate bond spreads over government securities have widened from 30-35 basis points (bps) to 45-50 bps.

  This resulted in many issuers accepting only partial subscriptions, forcing them to return to the market with follow-on issuances to meet their funding targets.

  “February saw a strong resurgence in primary bond issuances, as issuers who had deferred their fundraising in January rushed to tap the market despite a rising yield environment. The surge in supply led to a notable widening of credit spreads, particularly between 10-year G-Secs and corresponding corporate bonds,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP.

  January’s extreme bond yield volatility was largely due to global uncertainty emanating from Donald Trump’s return to the White House and fluctuations in US Treasury yields.  

Additionally, there was an overhang of RBI’s monetary policy and the Union Budget. Given the momentum, FY25 is on track to surpass the previous financial year’s total bond issuance, Srinivasan added.

  “We are in the phase of the year-end. Entities are rushing to complete the borrowing plan for the year. In January, they were waiting for the policy outcome and Budget announcements. Everybody was hoping for a better rate after the rate cut, but the yields moved up because of high supply,” said Ajay Manglunia, managing director (MD) & head-fixed income, InCred Capital Financial Services.

  “There was so much uncertainty in January, the issuances had dropped, but now that we are done with budget and policy, issuances are coming up. March is the last month to match the books. We might also see some banks coming up with issuances,” said a dealer at a private sector bank. 

Some major issuers in February included state-owned entities such as National Bank for Agriculture and Rural Development (Nabard), Small Industries Development Bank of India (Sidbi), PFC, REC, National Housing Bank (NHB) and National Bank for Financing Infrastructure Development (NaBFID), among others.