MUMBAI: Indian firms are increasingly tapping the bond market to fund acquisitions, with at least three planning to raise over $2 billion in the next 4-6 months, as mutual funds drive demand, according to merchant bankers and investors.
Mutual funds, flush with capital, are actively participating in such financing, which has so far been led by foreign lenders and credit funds, while Indian banks are pushing the central bank to also allow them to fund buyouts.
Acquisition financing has played a major role in boosting overall corporate bond sales to a record 4.75 trillion rupees ($54.22 billion) so far in 2025, up more than 15% from the previous year.
JSW Paints, which is eyeing Dutch paint maker Akzo Nobel’s Indian unit, aims to raise around 50 billion rupees through bonds to fund the deal, while Manipal Hospitals could raise 53 billion rupees for its acquisition of Sahyadri Hospitals, three bankers said.
Torrent Power is also in talks to buy Larsen & Toubro’s thermal business and could raise about 84 billion rupees through short-term bonds, they said.
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The companies did not immediately respond to Reuters emails for comment, while the bankers requested anonymity as they are not authorised to speak to media.
Earlier this year, two Jubilant Bhartiya group subsidiaries raised 56.5 billion rupees, while Torrent Investments raised 25 billion rupees from the bond market for acquisitions.
“During Covid, acquisitions were largely funded through internal accruals or equity raises, but we are now witnessing a trend where companies are returning to the debt market, and that’s largely because the pricing is conducive,” said Sunaina Da Cunha, fund manager at Aditya Birla Sun Life AMC.
“Mutual funds have ample funds available and find the spreads attractive, so it is a win-win situation for everyone.”
Net asset under management in corporate bond funds stood at 2.06 trillion rupees at the end of July, up over 300 billion rupees in the first four months of the year, and surpassing the total for the previous fiscal, per data from the Association of Mutual Funds in India.
Firms prefer to borrow in India as surplus liquidity conditions has brought down corporate bond yields. The LSEG AAA-rated benchmark yield is between 6.97% and 7.05%, down 45-60 basis points from last year.
Most of these transactions used to be funded by offshore issuances but with the higher cost of foreign currency funds, many issuers are looking domestically, said Arnab Choudhury, executive vice president, debt capital markets at SBI Capital Markets.
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