Corporate bond issuances plunge 47% YoY in June as firms await fiscal clarity in upcoming Budget

corporate bond

Ahead of the Union Budget 2024, most corporates refrained from raising funds through bonds, which led to a sharp 47 percent year-on-year drop in issuances, money market experts told Moneycontrol.

According to Prime Database, companies and banks raised Rs 61,254 crore in June 2024, through corporate bonds, as compared to Rs 1.14 lakh crore in the year-ago period. On a sequential basis, issuances fell just over 25 percent as compared to Rs 81,815 crore in May.

"Corporates refrained from borrowing aggressively ahead of the Budget as they prefer to closely track the borrowing numbers, which are mostly expected to be lower than projected earlier," said Mataprasad Pandey, Vice President, Arete Capital Service.

Further, Vijay Kuppa, Chief Executive Officer of Incred Money said once this uncertainty is out of the way, issuances can be seen picking up.

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Budget projections

The Union Budget is important for issuers because the government market borrowing, fiscal deficit and expenditure give clarity on the movement of the interest rates in the coming months.

This usually helps issuers to plan their borrowings from the corporate bond market.

Of the total funds raised in June, the majority—Rs 26,280 crore, or around 43 percent of the total issuances—was raised by the top five issuers.

State Bank of India, National Bank for Agriculture and Rural Development, LIC Housing Finance, REC Ltd and National Housing Bank were the top five issuers in June.

State Bank of India raised Rs 10,000 crore last month to fund infra projects. The country's largest lender raised the funds at a coupon rate of 7.36 percent.

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Anshul Gupta, co-founder of Wint Wealth, said with the election event out of the way, the second quarter of the current financial year should be better for the issuers.

The issuances halved in June despite the yields on these instruments falling by around 5-10 basis points. The yields eased due to falling inflation, higher dividend transfer by the Reserve Bank of India, and tracking easing yield on government securities.