Muted earnings growth, sluggish private sector capex and an environment of low demand-high leverage are seen keeping overall corporate debt supply subdued in near term, a report by India Ratings and Research said.
Supply in the corporate bond market slowed 21.4% during January-April on a year-on-year basis, with growth momentum in the underlying economy not exhibiting meaningful signs of revival, it pointed out.
The report said that issuances between January and April stood at R1.66 lakh crore, against R2.11 lakh crore in the same period last year.
The slowing issuance was more pronounced in the banking/financial sector segment, real estate and roads and highways sector, it said.
India Ratings pointed out that bond supply from entities such as Power Finance Corporation and Rural Electrification Corporation waned as major state power undertakings accessed markets directly and as money from power distribution companies flowed into these entities.
The report highlighted that recourse to commercial paper (CP) for meeting working capital requirements has eased the liquidity profile of marginal borrowers, while marquee borrowers have increased their access to the CP market.