Home Entertainment “Corporate Fundraising Dips to ₹1.2 Trillion as Bond Yields Rise in July–August”
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“Corporate Fundraising Dips to ₹1.2 Trillion as Bond Yields Rise in July–August”

India Inc’s funding tap slowed sharply in July–August, with companies raising only about ₹1.2 trillion from domestic capital markets over the two months—down from a buoyant April–June quarter in which they mobilised more than ₹3.4 trillion. The downshift coincided with a jump in government bond yields and fresh fiscal worries that dented risk appetite and pushed up borrowing costs.

The quick takeaway

  • Fundraising fell to ~₹1.2 trillion in July–August, after a strong ₹3.4 trillion in April–June (Q1 FY26).
  • Yields moved against issuers: India’s 10-year benchmark rose ~19 bps in August, the biggest monthly jump in three years, finishing near 6.47%—even as the policy repo rate stayed unchanged after a cumulative 100 bps of cuts earlier in 2025. Higher G-sec yields typically pull corporate bond yields higher, crimping issuance.
  • Market microstructure added friction: dealers and banks pressed for fewer ultra-long government bond sales amid weak demand, a duration mix that had been amplifying the up-move in long yields and, by extension, corporate funding costs.

Why the tap tightened

1) A sudden back-up in yields

The most immediate driver was the August back-up in sovereign yields. The 10-year G-sec’s ~19 bps monthly rise—to around 6.47%—lifted the entire corporate curve. Primary market pricing widened as investors demanded more compensation for duration and macro risk, making many planned deals uneconomic or worth postponing. While the Reserve Bank of India has kept the repo rate steady after cumulative 100 bps easing earlier this year, the rate–yield gap widened as markets reassessed inflation and fiscal signals, pushing term premia higher.

2) Fiscal and policy headlines

Fresh fiscal worries—ranging from tax changes to questions about the borrowing calendar—nudged investors to seek higher yields or stay defensive. Banks and primary dealers urged a shift away from 30–50-year G-secs to ease indigestion at the long end. That preference matters because long-bond issuance had been clearing at premium yields, effectively setting a higher reference for pricing long-dated corporate paper and tightening financial conditions for issuers.

3) Risk-off pockets despite a solid year-to-date

Paradoxically, 2025 has been a robust year overall for bond fundraising—helped by earlier rate cuts and strong domestic savings—but the July–August window bucked that trend. By late August, corporate bond sales for 2025 were tracking at record levels, aided by mutual-fund demand and acquisition financing—yet the two-month air-pocket shows how quickly higher yields can dent issuance momentum.


What slowed—and what didn’t

Private placements of bonds

The bulk of India Inc’s rupee debt is placed privately with institutional buyers. These deals are particularly sensitive to day-to-day price action in the G-sec curve and to credit-spread optics. In July–August, several mid-sized issuers reportedly waited for better windows rather than accept wider spreads or tighter structures.

Public bond offers and NCDs

Public NCD shelves remained selective. While a handful of retail-targeted NCDs launched, many issuers preferred to watch the curve and investor flows settle, especially where credit ratings or tenors implied meaningful step-ups in coupons versus deals printed in Q2. (Context: a number of consumer and housing-finance names had queued NCDs through August.)

Equity capital markets: mixed but resilient

On the equity side, activity didn’t stall to the same extent. IPOs, QIPs, and SME raises continued to add up through 2025, cushioning overall corporate funding needs. That said, equity windows are episodic and don’t replace the scale and flexibility of rupee bonds for refinancing and capex.


Sector lens: who felt the pinch?

  • NBFCs & HFCs: Funding costs are highly sensitive to shifts in the G-sec curve. A 15–25 bps move can make a material difference to consumer-loan economics, nudging issuers to shorten tenor or add call options to keep coupons in check.
  • Infrastructure & energy: Long-dated paper is the workhorse for capex—but with the long end of the curve under pressure, several names preferred to wait, tap bank lines temporarily, or slice maturities.
  • Hospitals, airports, utilities: Acquisition-funding remained a bright spot with chunky prints still likely over coming months, but timing has turned more tactical—issuers are watching day-to-day yield moves before launching.

The mechanics: how higher G-secs hit corporate prints

Corporate coupons are typically built as G-sec yield + credit spread. When the base moves up quickly, all-in yields gap higher even if spreads are stable. If spreads widen simultaneously—say, due to thinner order books or risk aversion—the all-in cost can rise 30–50 bps within days, enough to push an issuer’s internal hurdle rate above acceptable levels. That’s why July–August saw more tactical issuance, shorter tenors, and greater use of call/put features to manage reinvestment risk.


Investors’ calculus: who’s buying at higher yields?

  • Mutual funds: After strong inflows into shorter-duration and corporate bond categories, fund managers found better secondary-market opportunities as yields popped, sometimes preferring to add duration in the secondary rather than stretch for new-issue concessions.
  • Banks & insurers: Mark-to-market pressures rise when yields jump, especially for long-duration books. That, combined with a heavy sovereign supply schedule, made balance-sheet buyers more selective in primaries, particularly beyond 7–10 years.
  • Foreign investors: With global rates and risk premia in flux, overseas participation remained price-sensitive; hedging costs and currency views dictated appetite more than usual.

Implications for CFOs

  1. Refinancing math changed overnight
    A 20 bps rise in the base adds roughly ₹2 crore in annual interest for every ₹1,000 crore of 10-year debt—multiplying across program sizes, this is non-trivial. CFOs weighing tender offers or liability-management exercises likely stood down unless strategic (e.g., covenant lightness) benefits outweighed costs.
  2. Tenor optimisation
    Given the long end’s indigestion, 5–7-year maturities looked more executable than 10–15-year tranches. Some issuers opted for staggered maturities—e.g., a 3/5 split—or embedded calls after year 3–4 to retain flexibility if yields retrace.
  3. Windows will be shorter, execution faster
    With volatile intramonth moves, bookbuilds may compress and intra-day pricing discretion becomes a competitive edge. Treasurers should keep documentation, rating actions, and board approvals “always-on” to strike when screens turn friendly.
  4. Diversify channels
    Even as bonds remain core, tapping QIPs/rights, working-capital CP, or loan syndications as bridging tools can smooth funding in choppy months. Equity windows in 2025 have stayed usable for names with earnings momentum, which can reduce debt-dependence at the margin.

Will the slowdown last?

Base case: episodic, not structural.
Three moving parts define the outlook:

  • Sovereign borrowing mix: If authorities tilt the H2 FY26 calendar away from ultra-long tenors and smooth supply, term premia could compress, easing corporate pricing. Ongoing RBI–market consultations point in that direction.
  • Policy path & inflation: With the repo unchanged post-easing and inflation forecasts still being debated, the market’s term structure will remain sensitive to data surprises. A clearer disinflation trend would help re-anchor 10-year yields.
  • Global spillovers: External shocks—tariff headlines, energy prices, or US yield moves—can seep quickly into local curves. That transmission was visible in August and could recur

Put differently: if 10-year yields retreat 10–15 bps and long-tenor G-sec supply lightens, the primary bond market should normalise, allowing deferred issuers to re-enter. Conversely, a renewed rise in yields would prolong the funding pause, especially for sub-AA categories where investor selectivity tightens fastest.


Strategy playbook for issuers (next 60–90 days)

  • Pre-clear shelf placements with flexible tranche sizing so you can upsize or downshift on the morning of launch.
  • Split execution: run dual-track (bank loan + bond) to preserve negotiating leverage; switch based on last-mile price discovery.
  • Consider amortisers over bullets for 7–10-year needs; they price tighter and reduce refinancing cliff risk.
  • Use call structures (NC3/NC5) or greenshoe options to manage market uncertainty without overpaying up front.
  • Investor mapping: align tranche tenors to the natural buyers—MFs (1–5 years), insurers (7–15), provident/pension (10+), and family offices (opportunistic).
  • Communicate the use of proceeds crisply—capex visibility, acquisition milestones, or refinancing benefits—since tighter credit selection makes storytelling a pricing lever.

What it means for investors

For bond investors, the July–August wobble created an entry opportunity at higher all-in yields without a commensurate rise in default risk for quality credits. But security selection matters: favour balance sheets with conservative leverage, comfortable interest coverage, and pricing power to pass through higher funding costs. Duration stance can be barbelled—own short paper for reinvestment optionality and selectively accumulate 7–10-year high-quality names if the curve compensates for term risk.

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