Fundraising via private issue of corporate bonds stays flat

Private placement of corporate bonds, for the record, scaled a new peak in FY25. By contrast, in the public market dominated by NBFCs, fundraising plunged 60% year-on-year. Companies raised ₹10.7 lakh crore (until March 27) through private placement of corporate bonds, compared with ₹10.2 lakh crore a year ago, data compiled by primedatabase.com showed. But public issuances retreated over 60% to ₹8,200 crore.

India's private placement bond market is dominated by financial institutions, such as banks, NBFCs and public sector entities.

The absence of HDFC, an erstwhile large marquee issuer that merged with its banking arm, and liquidity challenges help explain the muted fund-raising activity in the corporate bonds market. Just before its July 2023 merger, HDFC had raised more than ₹46,000 crore in Q1 of FY24. NBFCs, especially those involved in the retail business, went slow on lending because of regulatory scrutiny. There were also entity-specific restrictions.

Also, some large lenders opted for overseas borrowing. «Large NBFCs, which have been growing faster than the sector, were focused on diversifying their funding sources in FY25. Bank lending was still expensive compared to bond market and external commercial borrowings, where AAA-rated companies have a cost advantage of 20-25 basis points. But as you go down the rating curve, the borrowing cost significantly rises,» said Jinay Gala, director, India Ratings.

Gala expects NBFCs to close FY25 with a loan growth of around 20%, compared with 23-25% reported a