Despite record high, fundraising through rupee bonds slowed in FY24 – The Financial Express

India Inc’s fundraising through rupee bonds slowed in FY24, after strong growth in the previous fiscal due to a change in tax rules and as companies made showing restraint in expecting lower returns. In FY24, companies raised ₹11.06 trillion through rupee bonds, an all-time high, but the 21% growth was slower than the 51% recorded in the previous year.

Indian companies raised ₹9.9 trillion in FY23. Similar growth was also recorded in 2021, when companies raised ₹570,651 crore, an increase of 54.6% from ₹570,651 crore in FY20.

“Recent tax changes to debt mutual funds, which were part of bond ownership, have had a significant impact on capital flows. Following the regulatory changes announced in the February 2023 Budget, the tax for the highest bracket was increased from 20% with indexation to 39-40% without indexation. In the current post-tax scenario, investments in these instruments have become less attractive for investors looking for optimal returns,” Marzban Irani, Chief Investment Officer for Fixed Income at LIC. Mutual fund, told FE.

According to Vinay Pai, head of fixed income at Equirus: “HDFC was the largest issuer in FY23 whose market borrowings through bonds in the Indian market stood at ₹75,000 crore and after merger with HDFC Bank these shows ceased to exist. Even as many corporates and NBFCs increased their borrowings from the market through bonds in FY24, some companies refrained from long-term borrowing expecting lower yields.”

“Propel economic growth to reach a $5 trillion economy it is necessary to sharply intensify the issuance and subscription of corporate bonds and reduce the burden on banks. This may require revisiting the tax cut between stocks and bonds,” Pai added.

Reliance Industries (₹20,000 crore), Nabard (₹16,572 crore), HDFC Bank (₹15,000 crore) and Goswami Infratech (₹14,300 crore) were among others which issued rupee bonds during the exercise 24.

“Last year (FY23), the higher growth occurred on a lower base and liquidity was high for low yielding bonds compared to current market liquidity and better returns in the capital market own,” Mahesh Singhi, founder and managing director of investment banking firm Singhi. Councilors said.

According to Manisha Girotra, CEO of Moelis & Company: “It was a little slower, given that manufacturing was slower and bank lines were available. In FY25, we expect the manufacturing sector to recover due to increased production capacities of companies. We can expect increased activity after the elections.”

“IndiaThe strong economic outlook and falling long-term yields continue to be the main driver of the corporate bond market. This demand within corporate India is driven by the government’s sustained drive to free the capital expenditure cycle, reduce interest rates and develop progressive policies. Large issuers, including infrastructure companies, would continue to lock in their financing at current (lower) rates for the long term to support their long-term growth,” Sandeep Upadhyay, MD-Infrastructure Advisory at Centrum Capital. said.