Corporate bond issuances are set to recover in November, after falling to a low of 450.7 billion rupees in October, as companies line up large issues ahead of a possible second interest rate increase from the Reserve Bank of India in December.

As per confirmed bidding results from exchanges, companies have already raised at least 109 billion rupees on November 2 and 3. In the first seven days of October, issuances stood at 71.3 billion rupees. Bids scheduled for November 2-5 carry a combined base size of 142.65 billion rupees, with greenshoe options of another 135 billion rupees, which could take the total fund raising to 277.65 billion rupees.

Whether the current month can match June’s 1.005 trillion rupees of issuances, or September’s 1.21 trillion rupees, is less certain though. October’s busiest week brought in about 140 billion rupees.

Monthly Corporate Bond Issuance

Source: BSE & NSE bond issuance data

The RBI raised the repo rate by 25 basis points to 5.50% on October 7, its first rate hike since February 2023, and changed its stance to calibrated tightening. Some economists expect another hike at the December 2-4 policy meeting, which could encourage borrowers to bring forward their funding plans.

The pipeline is led by state-backed lenders and large non-bank financiers. The National Bank for Agriculture and Rural Development (NABARD) raised 60 billion rupees on Monday at an 8.27% coupon, using its full green shoe on a 10-billion-rupee base. The Small Industries Development Bank of India (SIDBI) has a similar structure, with a 10-billion-rupee base and a 50-billion-rupee green shoe. Bajaj Housing Finance is offering 7.5 billion rupees with a 22.5-billion-rupee green shoe, while Tata Capital Housing Finance has three series totalling 18 billion rupees.

Persistent Systems is the largest private-sector name, with six series planned, totalling 70 billion rupees, about half of the base size in the pipeline. The series, all rated AA+ and carrying an 8.95% coupon, matures between 2028 and 2031.

October Issuance Falls Sharply
Corporate bond issuance fell to 450.69 billion rupees in October, down 62.8% from September and 33.5% below the year-ago level. The month saw 91 deals from 65 issuers, compared with 215 deals from 133 issuers in September. September’s 1.21 trillion rupees was the highest monthly total in the April-October period.

Borrowing Costs Rise
The amount-weighted average yield on corporate bond issues rose to 8.69% in October from 8.25% in September, an increase of about 44 basis points. AAA-rated issuers paid an average 8.34%, up about 57 basis points, while AA-rated issuers paid 9.01%, up 48 basis points. BBB-rated issuers paid 12.73%, up about 143 basis points, while A-rated issuers paid 10.21%, down 42 basis points. The monthly averages reflect changes in the mix of issuers and maturities and do not represent repricing of identical bonds.

Coupons in the November pipeline sit close to those levels. AAA-rated issues range from 8.10% to 8.70%, while AA+ offerings range from 8.50% to 9.50%. Smaller finance companies and infrastructure firms are offering 9.8% to 13.5%, and one D-rated issuer is offering 18%.

REC raised 40 billion rupees at 8.30% on October 27. NABARD’s 8.27% coupon on Monday came as the 10-year government bond yield fell about 10 basis points to 7.31%, helped by softer crude oil prices.

A market participant said companies would continue to compare domestic bonds with bank loans and foreign-currency borrowing, including hedging costs. Domestic bonds could stay competitive if lending rates and the cost of hedged overseas funding rise further.

With public-sector lenders, non-bank financiers and private companies all in the market, November issuance is likely to be well above October’s. Whether it approaches 1 trillion rupees will depend on how many large issuers follow in the second half of the month.