Outstanding corp bonds could rise to Rs 65-70L cr by March 2025: Crisil

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February 25, 2021 2:45 AM

Take-out financing facilitated by pooling of assets can help banks and other infrastructure financiers to free up a portion of the over Rs 20-lakh-crore credit outstanding in the sector for fresh lending to new projects, she added.

However, demand is expected to be at Rs 60-65 lakh crore, which means foreign capital will be necessary to bridge the Rs 5-lakh-crore gap, it said.However, demand is expected to be at Rs 60-65 lakh crore, which means foreign capital will be necessary to bridge the Rs 5-lakh-crore gap, it said.

Innovation can help double the value of outstanding corporate bonds in the domestic market to Rs 65-70 lakh crore by March 2025, rating agency Crisil said on Wednesday in its yearbook on the Indian debt market. However, demand is expected to be at Rs 60-65 lakh crore, which means foreign capital will be necessary to bridge the Rs 5-lakh-crore gap, it said.

The National Infrastructure Pipeline envisages Rs 111 lakh crore of investments between fiscals 2020 and 2025 for infrastructure build-out. Raising such has become even more difficult because of the fiscal stress caused by the Covid-19 pandemic. Given this, the Indian capital markets will have a big role to play in financing the build-out through bonds, Crisil said.

For the bond market to fill the gap, supply-side innovations such as pooling of assets, a well-capitalised Credit Guarantee Enhancement Corporation and widespread adoption of the INFRA Expected Loss (EL) rating scale will be pivotal. On the demand side, credit default swaps, retail participation, index linked funds and mechanisms to improve liquidity will be enablers. Besides these, attracting foreign capital is crucial to bridging the emerging supply-demand gap, especially given the crowding-out by gilts stemming from the huge borrowing programme of the government, Crisil said.

Crisil estimates innovations can help mobilise Rs 7-10 lakh crore via infrastructure bonds through fiscal 2025. Ashu Suyash, MD & CEO, Crisil, said: “Pooled assets bring scale, diversification benefits and flexibility to structure the cash flows. This can attract foreign capital and improve the confidence of bond market investors.”

Take-out financing facilitated by pooling of assets can help banks and other infrastructure financiers to free up a portion of the over Rs 20-lakh-crore credit outstanding in the sector for fresh lending to new projects, she added.

A well-capitalised Credit Guarantee Enhancement Corporation can also enable issuances by lifting the standalone credit ratings of operational infrastructure assets to levels desired by investors. The INFRA EL ratings scale, which assesses the expected loss (EL) over the lifetime of an infrastructure debt instrument, helps investors deduce the typically low EL of such projects and thus kindle their interest, Crisil said.

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