This year, Indian corporations have raised a record amount from rupee bond markets, with large-sized issues driving such borrowings in recent months. Indian corporations collected over 914 billion rupees ($10.97 billion) through the private placement of bonds in November, bringing the total issuance for 2023 to 8.83 trillion rupees, the largest for any calendar year, according to figures from information provider Prime Database.
According to lenders, large borrowers are attempting to lock in current rates. "Because corporate bond yields did not rise sharply during the rate hike cycle, they may not fall sharply in the future," said Shameek Ray, head of debt capital markets at ICICI Securities Primary Dealership.
"It makes sense for large issuers to lock in funding at these rates for a longer term, even if this is not the bottom of the cycle, as the bottom would not be drastically lower," he added. In November, Reliance Industries, REC, and State Bank of India raised more than 400 billion rupees in total.
In December, Bank of Baroda raised 50 billion rupees and Bharti Telecom raised 80 billion rupees through its largest-ever bond sale.
Furthermore, Canara Bank and REC will raise 35 billion and 60 billion rupees, respectively, while SBI would issue a permanent bond worth 50-100 billion rupees. The state-run NaBFID will issue a bond for 100 billion rupees.
According to traders, Axis Bank and ICICI Bank may also issue huge infrastructure bonds. Apart from the interest rate environment, banks may have reached lending restrictions to individual borrowers, leading these corporations to enter the bond market, according to Ray.
Rising inflows from insurance firms and mutual funds guaranteed that supply was absorbed without having a significant influence on yields, according to traders. While the longer-term offerings of SBI and RIL were dominated by a large state-run insurance business, the shorter-term papers were devoured by mutual funds.
"The corporate bond yield curve is quite flat, and mutual funds are tanking up on short-duration bonds at attractive levels," said Trust Mutual Fund CEO Sandeep Bagla.
