Investors Embrace Risky Bonds for Better Returns

India's riskiest category of investment-grade corporate bonds is drawing record interest from wealthy investors and alternative funds, as falling benchmark yields push savvier buyers further down the credit spectrum in search of higher returns.

- Abirami Sekar

Yield on India's benchmark 10-year government bond has declined 36 basis points over the past three months to 6.27% as of Tuesday—far below the double-digit yields available in lower-rated corporate bonds.

Issuances of corporate bonds rated BBB+, BBB and BBB-, the lowest tier of rating, still considered investment-grade before slipping into junk status, have surged sharply in recent quarters.

According to Prime Database, 450 such bonds were issued in the fiscal year ended March 2025, up from 244 in FY24, 120 in FY23 and 75 in FY22.

Through 19 June in the current fiscal year (FY26), 76 additional issuances have already come to market.

The funds raised have followed a different trajectory. Issuers in this segment raised ₹17,653 crore in FY25, after ₹22,219 crore in FY24, ₹4,944 crore in FY23 and ₹8,634 crore in FY22. In FY26 so far, ₹5,845 crore has been raised.

The gap between issuance volumes and amounts raised partly reflects the impact of large outlier deals. In FY24, Goswami Infratech Pvt. Ltd, part of India's Shapoorji Pallonji Group, raised ₹11,000 crore through a single bond issuance.

Group, raised 14,300 crore through a single private placement at a steep 18.75% coupon, accounting for nearly two-thirds of that year's total BBB-category fundraising.