Companies and non-banking financial companies (NBFCs) have together mopped up R36,774.25 crore from the bond markets in July, taking the total amount raised in the first four months of FY17 to R1.71 lakh crore.
Despite a year-on-year halving of funds raised through corporate bond issues in April, the first four months of the current financial year collectively saw corporates and NBFCs borrowing R1.71 lakh crore through the corporate bond market, higher than the R1.69 lakh crore raised in the same period last fiscal year. In FY16, borrowings from the corporate bond market amounted to R4.58 lakh crore, compared with the R4.04 lakh crore raised in FY15.
It has been cheaper for companies to borrow via bonds for some time now, rather than tap banks for loans — the yield on a AAA-rated one-year paper is about 160 basis points lower than the lowest marginal cost of funds-based lending rate in the market.
The outstanding amount on corporate bonds as on June 30 stood at R20.63 lakh crore, an increase of R2.74 lakh crore over June, 30, 2015, data released by the Securities and Exchange Board of India (Sebi) showed. On the other hand Reserve Bank of India data revealed that outstanding bank credit to industry as on May 27 stood at R26.63 lakh crore, only 1% higher than R26.38 lakh crore outstanding as on May 29 last year.
Further, a fall in bond yields by about 60 basis points since the beginning of February has made it even more attractive for corporates to turn to the corporate bond market for funds. As a result, a AAA- rated corporate can now borrow at 7.6-7.7% compared with 8.1% levels earlier.
“Even banks are trading in the corporate bond market these days,” Ajay Manglunia executive vice-president, Edelweiss Financial Services, said recently. He pointed out that the average daily trading volumes in corporate bonds have shot up to anywhere between R10,000 crore and R15,000 crore compared with just R500-1,000 crore three years back.
The fall in yields on corporate bonds has more or less been in line with the fall in yield on the 10-year benchmark gilt, which closed on Wednesday at 7.10% after having declined to an intra-day low of 7.08%.