Private placements of corporate bonds saw a modest decline in June, reflecting a period of cautious fundraising amid moderating credit growth and uncertainty surrounding new government policies. Corporations and financial institutions raised Rs 66,300 crore through 247 bond offerings in June. This marks a significant year-on-year drop, as fundraising was halved compared to June 2023, when Rs 1.39 lakh crore was raised through 230 bond issuances.
The slowdown in bond issuances is attributed to a variety of factors. The moderation in credit growth, which serves as an indicator of economic activity, and the hesitance of issuers to engage in new fundraising amid uncertainties over the new coalition government’s policies contributed to the cautious approach. Additionally, a shift in borrowing preferences was noted, with many non-banking finance companies (NBFCs) opting for term loans from banks instead of issuing bonds.
Bank credit growth
Data from the Reserve Bank of India reveals that bank credit grew by 17.4% year-on-year to Rs 168.81 trillion as of June 28, down from 19.2% as of June 14. The slowdown in bank credit growth and the decline in large corporate borrowing are seen as factors influencing the drop in bond issuances. The vagaries of the coalition government further added to the cautious sentiment among issuers.
Despite a slight decline in borrowing costs, with yields on corporate bonds issued by entities such as the National Bank for Agriculture and Rural Development dropping by 3-5 basis points, bond issuances were subdued. NABARD emerged as the largest issuer among state-owned entities, raising ₹50 billion through bonds maturing in December 2029. Other notable issuers included REC, National Housing Bank, and Indian Railways Finance Corp.
