India’s bond slump worse than others, issuance value down 10.1%

Indian issuers are borrowing lesser by way of bonds in comparison with their world friends.


The complete worth of bond issuances was down 10.1 per cent on a rolling 4-quarter foundation in March 2022, in comparison with an analogous interval in March 2019, reveals an evaluation of knowledge from tracker Refinitiv, a London Stock Exchange Group (LSEG) enterprise.

The 4 quarters ended March 2019 marked the final full monetary 12 months earlier than the pandemic took maintain.


Global bond issuances are up 39.3 per cent as compared.

Emerging market issuances are up 42.8 per cent.

An additional evaluation of issuer information reveals that a lot of the stoop has come due to decrease bond issuances by the monetary sector.

Financial section issuances are down 33.3 per cent within the interval into consideration.

Non-financial issuances have greater than doubled (up 106.6 per cent) in the identical interval.

The monetary sector accounts for the majority of bond issuances.

It accounted for over 80 per cent of issuances for the 4 quarters ending March 2019.

Financials are likely to dominate the bond market in India, in keeping with a notice on the Indian company bond market revealed within the Reserve Bank of India (RBI) bulletin dated January 2019.

This goes hand-in-hand with a monetary system the place banks dominate.

This has been prevalent in lots of rising markets, particularly in Asia, in keeping with the notice by Shromona Ganguly, analysis officer, division of economic markets within the RBI’s division of financial and coverage analysis.

India’s company bond market stays comparatively much less developed, added the notice.

“Both the first and the secondary segments of the market proceed to be dominated by issuance of bonds by infrastructure and monetary providers firms whereas the share of producing corporations is negligible.

“The placement of company debt stays largely personal, accounting for as excessive as 98 per cent of the full quantity raised, on a median,” it stated.

A regulatory notice entitled ‘Report of the Working Group on Development of Corporate Bond Market in India’ issued in August 2016 famous the reliance on financial institution funding, and the necessity for growing company bond markets.

“There are inherent structural incentives for borrowers to prefer bank financing, e.g., cash credit system and no disincentive for enjoying unutilised working capital limits… going forward the corporates have to reduce their reliance on bank lending and move, accordingly, to market mechanism for accessing resources,” it stated.

Adjusted non-food financial institution credit score, a metric for a way a lot cash banks are lending, accounted for 52.3 per cent of the full circulation of sources to the industrial sector in 2018-19.

In different phrases, over half of the full cash that India’s industrial sector put to make use of earlier than the pandemic, got here from banks.

A have a look at cash raised by the monetary versus the non-financial section reveals a sharper (although nonetheless nascent) restoration for non-financial issuers within the bond market.

Analysts imagine that firms will solely elevate extra debt as they really feel the necessity for elevated capital expenditure, which in flip is determined by an enchancment in demand because the economic system recovers.

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