India corp debt issuances may rise further to new record in 2024 - analysts

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05/01/2024 05:25

By Dharamraj Dhutia
       MUMBAI, Jan 5 (Reuters) - 
    Corporate bond issuances in India are likely to remain
robust in the new calendar year, potentially reaching fresh
records, driven by the sustained capital expenditure push from
companies and a likely softer interest rate regime, analysts
said.
    Indian companies raised a record 9.70 trillion rupees
($116.50 billion) through the sale of bonds in 2023, a 25% jump
over 2022, data from information provider Prime Database showed.
    The issuance size could go up by 20% from 2023 as a reversal
in rates will happen this year, said Venkatakrishnan Srinivasan,
founder and managing partner at Rockfort Fincap.
    "Usually, corporate bond yields will correct immediately,
compared with rates on term loans."
    
        India's central bank is expected to start lowering rates
at some point in mid-2024 and though the rate cuts are unlikely
to be deep, rates could drop by 25-50 basis points by year-end,
according to traders and economists.
        Better liquidity and softer interest rates are likely to
fuel growth in issuances, said Sujata Guhathakurta,
president-debt capital market and infrastructure financing at
Kotak Mahindra Bank.
    "We expect a lot of new issuers, especially from the
infrastructure and NBFC (non-banking financial company) sector,
tapping the bond market to meet their funding needs as part of
their diversification strategy," she added.
    The issuances in 2023 were dominated by banking and
financial sector firms, and merchant bankers do not expect any
major change in this trend in 2024.
    Despite heavy supply, investors and bankers are confident
that the rising corpus with mutual funds and long-term investors
like insurance and pension funds would come to the rescue. 
    Kotak's Guhathakurta said the long-only investors would
absorb the longer-tenor issues, while mutual funds, corporates
and bank treasuries would remain active in the shorter-tenor
space.
    Longer-duration issuances by banks, financial and state-run
firms have been lapped up by insurance companies and provident
funds over the last few months, with spreads over government
bond yields narrowing, reflecting robust demand. 

    ($1 = 83.2640 Indian rupees)

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Indian firms raised a record amount via corporate bonds in 2023
Indian firms raised a record amount via corporate bonds in 2023 
  https://tmsnrt.rs/3t6m8QR
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 (Reporting by Dharamraj Dhutia; Editing by Swati Bhat and
Sohini Goswami)
 ((Dharamraj.Dhutia@thomsonreuters.com;))