India Inc should warm up to corporate bond issuances

Non-financial businesses issuing more corporate bonds will work in favour of the economy

- SUBODH RAI

As many as 500 companies account for about 90% of India's market capitalization, with a combined value of nearly ₹400 trillion as of March 2025. On the other hand, the domestic corporate bond market, valued at about ₹64 trillion (with ₹53 trillion of bonds outstanding in the long-term capital market and ₹11 trillion in the short-term market), accounts for a mere 19-20% of India's nominal GDP.

In contrast to the equity market, which boasts a diverse representation of sectors, the corporate bond market is dominated by financial sector entities. As much as 70% of the issuances in the past five years originated from the financial sector, which includes both listed and unlisted entities.

Non-financial companies have been slow to embrace bonds for their funding needs. A Crisil Ratings study estimates the total outstanding borrowing of the top 500 companies at ₹83 trillion at the end of 2023-24, with ₹16 trillion denominated in foreign currencies and ₹67 trillion financed domestically. Of the domestic borrowings, only 43% was raised through the corporate bond market, with the remaining 57% coming from banks and other financial institutions.

Financial sector companies tap the corporate bond market for a substantial 49% of their domestic borrowings. This is explained by the nature of their business and regulatory requirements. In comparison, non-financial private companies and non-financial public sector undertakings (PSUs) have significantly lower reliance on the market, at 21% and 34%, respectively.