Bond issuances sees scaling new high at Rs 10.6 trillion in FY25 after a record run in FY24
MUMBAI: After a record run last fiscal amidst the continuing elevated interest rates domestically and globally, corporates more likely to tap the local bond markets more than bank loans, pushing up the overall bond sales to Rs 10.6 trillion this fiscal from the record it had hit last fiscal with Rs 10.2 trillion in mop-up, says a report.
According to Icra Ratings, the elevated interest rate condition is likely to drive the coprorates to the bond street than banks, leading to higher debt sales which is likely to touch Rs 10.6 trillion this fiscal from Rs 10.2 trillion in FY24.
This will have the corporate bond outstanding to increase to Rs 50.3 trillion by the end of this fiscal clipping at annual growth of 9.5%.
However, the agency expects the overall incremental credit which includes bonds, non-food bank credit and commercial paper issuance, expansion to moderate to Rs 24.5 trillion this fiscal from Rs 25.4 trillion in FY24, which was an all-time high.
Its assessment comes from expectation of non-food bank credit especially to non-bank lenders, to moderate slightly in FY25 from the record-high seen in FY24.
But the shortfall will be taken care of by the local debt market as the interest rates remain elevated in developed markets, making the local debt capital market more attractive for large corporates.
According to Sachin Sachdeva, a vice-president & sector head at the agency, competitive funding conditions in domestic markets compared to developed markets means that large corporates tapped more domestic funding sources over the last two years. Strong demand for loans from retail borrowers and non-bank finance companies drove a significant portion of the incremental flow of credit from banks.
This resulted in the highest ever NFBC expansion of Rs 22.3 trillion in FY24 far outpacing the incremental NFBC expansion of Rs 18.2 trillion recorded in FY23.
This incremental credit flow was also supported by the all-time high corporate bond issuances of Rs 10.2 trillion in FY24, up 16.9% from FY23, resulting in the stock of corporate bonds outstanding rising to an estimated Rs 46 trillion, up 6.6% on-year as of end March 2024, from Rs 43.1 trillion as of March 2023.
Besides, the stock of commercial papers outstanding also rose by Rs 0.4 trillion in FY24 to Rs 3.9 trillion as of March 2024. Cumulatively, these three sources accounted for Rs 25.4 trillion of incremental credit flow in the domestic market, an all-time high.
