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

Indian corporate bond issuance is expected to remain subdued in September, with fundraising activity not expected to rebound after a sharp decline in August, according to bankers. Debt fundraising through private placements of bonds fell by 45% in August, compared to July, as yields increased across the curve, mainly impacting the shorter end.

Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap, stated that liquidity alone will not lead to stronger corporate bond fundraising, as it has been moderating. Indian firms previously raised 1.13 trillion rupees and 1.16 trillion rupees in June and July, following easing rates following the central bank's measures to attract dollars in June.

Merchant bankers noted that demand for shorter-term debt faltered in the second half of August, with highly-rated firms forced to scrap debt sales or borrow at significantly higher rates. State-run entities PFC, REC, and Nabard withdrew from shorter-duration bond sales, while SIDBI had to offer a 7.70% interest rate to raise three-year funds.

Srinivasan explained that the issue lies not with the availability of liquidity, but the price investors are willing to pay. Issuers have alternative options and are less inclined to commit to higher domestic bond yields. For September, banker expect a selective market, rather than a significant revival in volumes, with elevated sovereign bond yields feeding into corporate bonds and NBFC funding costs if they persist.