By Tanuka Roy
Corporate bond issuances have seen a steady uptick in the last 10 years. According to an analysis by Bank of Baroda, from just Rs 3 trillion in FY12, the issuances soared to Rs 7.8 trillion in FY21, before moderating to Rs 6 trillion in FY22.
However, in FY22, corporate bond yields rose in line with G-sec yields amid a higher than expected borrowing programme by the Centre, elevated oil prices and rising global yields, according to the report. “This could partly have come in the way of issuances as unlike bank loans where interest cost varies with the monetary regime, cost of capital gets locked in at the issuance rate for bonds. As a result, issuances of corporate bonds were also lower in FY22,” the report by Aditi Gupta, economist at Bank of Baroda, noted.
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In the current year, till July 31, corporate bond issuances have increased by 14.1% on a year-on-year basis.
The study further showed that almost all of these issuances came from private placements. There has been no change in this trend in the last 10 years, Gupta observed.
In terms of growth rate, while both credit outstanding by SCBs (scheduled commercial banks) and corporate bonds started at a similar level of ~18% in FY12, corporate bonds have witnessed higher momentum in all the years thereafter, barring FY20.
Even in FY21, while SCB credit growth moderated sharply to 1.6% from 7.6% in the previous year, growth in corporate bonds outstanding improved to 11%. In FY22 as well, outstanding corporate bonds have increased by 11.2%, while growth in SCB credit has been lower at 8.1%, the study showed.
Though there has been considerable progress in the development of the corporate bonds market in the country, trading in the corporate bonds market has been limited compared with the G-sec market, Gupta has pointed out.
