Decline in yields triggers $4.5 billion debt issue from Indian companies

Indian companies are set to borrow $4.5 billion by selling bonds in the first five trading sessions of April to take advantage of the plunge in yields, a rare move as they typically do not need major funds at the start of a new financial year.

The sales include planned issues worth more than $2 billion on Tuesday, the end of the five-day run that will have included at least 15 companies tapping the bond market.

Yields on AAA-rated up-to-five-year corporate bonds have dropped 25-30 basis points in April, while those for the longer-term papers have plunged 20-25 bps.

This "has triggered strong demand for bonds, pushing yields lower right from the beginning of April," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. "This favorable shift has encouraged issuers to front-load their fundraising plans."

 

The Reserve Bank of India has infused more than ₹5.20 trillion ($60.62 billion) through debt purchases and foreign exchange swaps since the start of 2025. 

Consequently, India's banking system liquidity moved into surplus towards March-end and has now jumped to its highest level in the last five months. Additionally, the RBI plans to buy bonds worth another ₹600 billion in April.

This unexpected rush of borrowing underscores the changing dynamics of India's financial landscape, signalling potential benefits for investors and companies in the short term.

"The demand for stable returns, coupled with ongoing uncertainties in stock markets, naturally aligns with the risk-averse sentiment of investors," said Vishal Goenka, co-founder of bond trading platform IndiaBonds.com.

Markets are expecting an additional 75 bps of rate cuts in 2025, after the central bank cut rate by 25 bps in February.

While most of the issuances are dominated by non-banking financial companies, which are selling shorter-duration papers, some state-run firms are also tapping the market with longer-tenor debt.

"State-run firms could lock in long-term funding at relatively lower yields. A well-rated state-run company tapping the market for five to ten years should comfortably achieve yields of 7% or lower, especially if the issue is structured well and demand is managed strategically," Rockfort Fincap's Srinivasan added.