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Corporate bond issuances have dipped in the second half of calendar 2024 compared to the same period a year ago, in the absence of the erstwhile HDFC, market volatility, higher yields and some liquidity concerns.
In the period from July to date, companies have raised Rs 2.9 lakh crore, down 17.6 per cent from a year ago, according to data from Prime Database. The top five issuers accounted for around 29 per cent of the total.
The corporate bond market, which got off to a fiery start this year, saw a lot of supply and demand for corporate papers till June. The pace moderated in July and August, and while there was a pick-up in September, it crashed in October. In November, however, things seem to be looking up with a flurry of issuances from corporates such as Reliance Industries, banks and NBFCs.
Part of the reason for the dip is the absence of HDFC Ltd, which used to be a big issuer, according to Venkatakrishnan Srinivasan, Founder and Managing Partner, Rockfort Fincap. He pointed out that after June, the Reserve Bank of India had been making hawkish noises and the prospect of OMO sales kept the markets on edge.
“Liquidity is becoming a concern,” said Srinivasan. “The markets are dicey and there are no positive cues.”
Similar to last year, bonds having coupons of 7-8 per cent raised the highest amount, with not much difference in the proportion of funds raised within coupon ranges. Srinivasan said rate hike transmission is still to take effect and, on average, most issuers have issued at the same rates as they did a year ago.
Tenors have, however, seen a big difference. Issuance of 1-2 year paper has spiked up, and, to a smaller extent, 2-3 year paper. Longer tenure papers in the 10-15 year slab and over 15 years are also being issued.
Most issuers are sticking to short maturing papers as they expect some rate cuts toward the middle or the second half of the year. Comparatively speaking, issuances in the 4-10 year segment have dropped sharply.
However, investor appetite is robust as insurance companies, private credit firms, family offices and corporate treasuries have funds to invest. The rest of the year should see the pace picking up.
While state-run banks have lined up issuances, other prospective issuers include Power Finance Corp, NABARD, Power Grid, and several municipal corporations.
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