Additional corporate bond issuances of ₹40,000-50,000 crore are likely over the next five years due to SEBI’s move to shift a quarter of the incremental annual — and long-term — borrowings by large companies away from banks.

That compares with issuances of ₹6.56 lakh crore seen in FY18 alone, said Crisil. Incremental issuances will also be a function of the private sector investment cycle and trends in the corporate bond and external commercial borrowings markets, it noted.

The SEBI framework says large corporates — defined as having outstanding borrowing of ₹100 crore or more, a credit rating of AA or higher, having its securities listed on a stock exchange, and intending to mobilise long-term funds — have to raise 25 per cent of their incremental borrowings for a year through corporate bonds.

Long-term borrowings

Crisil’s analysis shows 444 companies with aggregate rated long-term borrowings of ₹45 lakh crore as of FY18 come in this category.

They accounted for 35 per cent of the total credit outstanding of ₹130 lakh crore as of last fiscal.

However, around 210 of these 444 companies have already been sourcing at least a quarter of their funding needs from the corporate bond market.

So, the remaining 234 would be the ones driving incremental issuances. At present, they hold only ₹6 lakh crore of rated, long-term debt.

Gurpreet Chhatwal, President, Crisil Ratings, said: “SEBI’s framework is a step in the right direction to deepen the corporate bond market and usher in a market-oriented, risk-based pricing culture. Another ₹2 lakh crore of issuances would have been possible if the framework had included ‘A’ category papers and unlisted corporates.”

The inclusion of ‘A’ category and unlisted corporates would have made about 1,400 companies with total debt of ₹15 lakh crore eligible.

This would have not only materially increased the supply, but also improved the risk appetite and diversity of sectors in the domestic corporate bond market, Crisil said.

Related Topics