Domestic rating agency Icra on Tuesday said corporate bond issuances are likely to rise to Rs 10.6 trillion in FY25 from Rs 10.2 trillion in FY24 . Accordingly, the overall corporate bond outstanding is likely to increase to Rs 50.3 trillion by March 2025, a year-on-year (y-o-y) growth of 9.5%.
Higher competitive funding conditions in domestic markets compared to developed markets has led to big corporates tapping more domestic funding sources over the last two years, Icra said.
While corporate bond issuances will likely rise in FY25, the incremental total credit, including from bonds, non-food bank credit and commercial papers (CPs) is expected to moderate to `24.5 trillion in FY25 from an all-time high of `25.4 trillion in FY24.
Recent regulatory actions including the risk weight hike by the Reserve Bank of India (RBI) on unsecured retail loans, bank funding for non-banking finance companies (NBFCs) and tight liquidity in the banking system may constrain the incremental credit growth of banks, Icra said.
However, the yield on government bonds is likely to remain range-bound, driven by demand from foreign portfolio flows due to their inclusion in global indices. This shall improve the competitiveness of funding from debt capital markets as against bank borrowing and would drive up corporate bond issuances.
“Growth is expected to eventually taper off from these levels on the back of tight liquidity, even as the foreign flows in IGBs will remain supportive for growth in corporate bond issuances. Accordingly, Icra estimates incremental total credit (bonds, non-food bank credit and CPs) expansion to dip to `24.5 trillion in FY2025,” said Sachin Sachdeva, vice president and sector head at Icra Ratings.