Riding on low-interest rates and policy reforms by the Reserve Bank of India (RBI), Indian corporates have raised the highest-ever sum of 7.45-lakh crore through rupee bonds this year.

This is 8.3 per cent higher than ₹6.87-lakh crore raised in 2019. A total of 5.12 lakh crore raised in 2018. With another 10 days for the year to end, companies are expected to raise another ₹20,000-25,000 crore.

“Covid-19 had an impact in March and April, when the companies had restrained from raising funds through bonds, but then there was a sharp recovery in May. The reasons included an ample liquidity in the system, lower interest rates and RBI’s introduction of Targeted Long-Term Repo Operations (TLTRO), which helped a lot in terms of corporates to issue more bonds,” said Ajay Manglunia, Managing Director and head institutional fixed income at JM Financial.

“The interest rates of 10-year corporate bonds also fell to about 6.5 per cent this year, compared with 7.5 per cent last year. This resulted in many corporates raising funds from the bond market, rather than bank financing,” he added.

The interest rates on AAA corporate bonds for 3-5 years (shorter duration) were available for 4.50-5 per cent, while that of bank finance was at 6-8 per cent.

Government firms were the largest issuers of bonds this financial year, as it has been in the past, too. Power Finance Corporation (₹40,967 crore), Rural Electrification Corp (₹30,401 crore), State Bank of India (₹27,371 crore), National Bank for Agriculture and Rural Development (₹26,097 crore) and IRFC (₹21,398 crore), among others were active this year.

Reliance Industries and Bharat Sanchar Nigam Ltd, who had kept away from raising funds through bonds in 2019, raised ₹16,455 crore and ₹8,500 crore, respectively.



Surplus liquidity

“The main reason is the availability of surplus liquidity in the market, apart from this there is a good amount of capital flow coming into the Indian markets. Due to the pandemic there were no deployments happening across the world,” said Mahesh Singhi, founder and Managing Director at investment banking firm Singhi Advisors.

“This trend is expected to continue for the next 4-5 months,” Singhi added.

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