India Inc debt fundraising halves in August; rebound unlikely this month, bankers say

MUMBAI: Indian corporate bond issuance is unlikely to rebound in September after debt fundraising nearly halved month-on-month in August, with a spike in yields reducing incentive for firms to lock in borrowing, keeping primary-market activity subdued.

Indian companies raised around 617.6 billion rupees ($6.50 billion) through private placement of bonds in August, according to data from Prime Database.

The quantum witnessed a 45% drop as compared to July, while yields rose across the curve mainly led by the shorter end.

Liquidity by itself will not translate to stronger corporate bond fundraising which is one of the reasons issuance has been moderating, said Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap.

Firms had raised 1.13 trillion rupees and 1.16 trillion rupees in June and July, in the background of easing crashed after central bank’s dollar-attracting measures in June.

Indian firms turn to longer-term debt amid strong demand as yield gap narrows

Merchant bankers said, the demand for shorter-end faltered in the second half of August, with highly-rated firms forced to scrap debt sale or borrow at sharply higher rates.

State-run PFC, REC and Nabard were forced to withdraw were forced to withdraw shorter duration bonds, while SIDBI had to shell out 7.70% to garner three-year funds.

“The issue is not the availability of liquidity, but the price at which investors are willing to deploy it. Issuers have alternative options, and have less incentive to lock into elevated domestic bond yields,” he adds.

Expects September to remain a selective market rather than witnessing a meaningful revival in volumes, and if sovereign bond yields stay elevated, risk premium will eventually feed into corporate bonds and NBFC funding costs.