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Mint
10-07-2025
- Business
- Mint
Bond appetite: Corporate debt issuances on track to shatter another record
Corporate bond issuances are expected to scale another record in the ongoing fiscal as Indian companies continue to raise funds at cheaper costs from the debt market, when banks are taking long to fully pass on lower policy rates to businesses. Local companies are expected to raise over ₹11 trillion from the bond markets in 2025-26 financial year, according to sector compares with ₹9.95 trillion raised through public and private debt issues combined in FY25, according to the market regulator's data, implying an estimated annual rise of about 10.5% this fiscal. 'With the faster transmission of recent rate cuts in the debt capital market compared to bank lending rates, corporates have preferred to raise funds via bonds rather than borrow from banks," said Sachin Sachdeva, vice-president and sector head, financial sector ratings at Icra Ltd. This is also reflected in the muted incremental credit expansion by banks in Q1 of FY26, he said. The Monetary Policy Committee of the Reserve Bank of India cut the repo rate by 25 basis points (bps) each in February and April. A 50 bps cut in June followed, leading to a 100 bps drop in the benchmark rate in five months. The RBI also injected liquidity by reducing the cash reserve ratio—the portion of deposits that lenders have to park with the regulator—by 1 percentage point. The bond market has quickly reacted, making it a more cost-effective and flexible option for large, rated borrowings, according to experts. The benchmark 10-year government bond yield fell by 37.6 basis points from 6.700% on 31 January to 6.324% on 30 June. By comparison, RBI data shows, banks' one-year marginal cost of funds-based lending rate—an internal benchmark that tracks deposit rates—fell by 10 basis points to 8.90% during the period. 'This interest rate arbitrage is making bond issuances significantly more attractive," said Nikhil Aggarwal, founder and group chief execuitve officer of Grip Invest, a platform for high-yield, fixed-income investments. 'A softer rate cycle, refinancing requirements and capex plans are converging to drive issuance volumes. If the current momentum continues, ₹12.5 trillion is within reach." Icra's Sachdeva expects overall bond issuances in FY26 to be in the range of ₹10.7 to ₹11.3 trillion. Outlook strong The trend so far this fiscal year mirrors the optimistic outlook. Data by the Securities and Exchange Board of India (Sebi) shows 341 issues worth ₹1.86 trillion in April and May. According to Prime Database, 165 offers amounting to around ₹0.93 trillion were recorded in June (Sebi data for June has not been released yet). This means Indian companies raised ₹2.79 trillion through 506 private bond placements in the April-June first quarter of FY26. According to Sebi data, companies raised ₹1.56 trillion via bonds in the corresponding period of FY25. According to the Prime Database, some of the AAA-rated 3-year bonds issued in June 2025 include: Bajaj Housing Finance Ltd with a coupon rate of 7.02% per annum; L&T Finance Ltd with a coupon rate of 7.23% per annum; and the National Bank for Agriculture & Rural Development (NABARD) with a coupon rate of 7.48% per annum. By comparison, banks' MCLR stood at 8.9% in June. Their loans to industries—micro, small, medium and large—grew 4.8% year-on-year in May, showed the latest RBI data. But bank credit to large industries grew 1% during the period. To be sure, private placements continue to dominate corporate bond offers, with public issues contributing a fraction. Sebi data shows 45 public bond offers raised ₹0.19 trillion in FY24and 43 such issuances raised around ₹0.08 trillion in FY25. Underdeveloped market India's corporate bond market remains underdeveloped, accounting for just 18% of gross domestic product, far below the 70–100% seen in developed economies, said Aggarwal of Grip Invest. According to the Economic Survey FY25, the corporate bond market is 80% of GDP in Korea and 36% in China. Published in January, the report pointed out that the market for corporate bonds comprises high-end bonds, with 97% of corporate bond issuances concentrated in the top 3 rating categories (AAA, AA+ and AA). Moreover, issuances could moderate in the second half of the financial year as RBI will consider incoming data on growth and inflation to decide on the repo rate trajectory, said Aditi Mittal, co-founder of bond investment platform IndiaBonds. However, due to RBI's pause on rate cuts and global market uncertainties, demand-supply dynamics remain supportive, she said. 'If current momentum sustains, ₹12 trillion is certainly achievable. However, a more conservative and realistic estimate would be in the range of ₹11-11.5 trillion," said Mittal. While RBI's 100 bps repo rate cut and CRR reduction have lowered borrowing costs, strong institutional demand from mutual funds, insurers and pension funds is deepening the market, according to Mittal. 'With global macro risks still looming, corporates are locking in rates early, especially for refinancing or pre-emptive capex funding," she said. 'Sharp declines in short-term yields have also made one- to three-year bonds highly attractive, driving strong issuer participation."
Mint
22-06-2025
- Business
- Mint
US attack on Iranian nuclear sites roils oil market, India braces for possible price surge
New Delhi: Global crude oil prices may face sharp upward pressure when markets open for trade Monday, after the US launched air strikes on three Iranian nuclear facilities — Natanz, Fordo and Isfahan — escalating tensions in the Middle East. The strikes have raised concerns of supply disruptions that could hit major importers like India, which depends on overseas oil for more than 85% of its energy needs. In a televised address on Sunday (India time), US President Donald Trump confirmed the direct American assault on Iran's nuclear programme, ending days of speculation about Washington's entry into the Israel-Iran conflict. He warned that further strikes could follow. Read this | Mint Primer: What if the US joins Israel's war with Iran? 'Remember, there are many targets left. Tonight was the most difficult of them all by far, and perhaps the most lethal. But if peace doesn't come quickly we will go to those other targets with precision, speed and skill," Trump said. Hormuz threat puts India's energy security at risk The strikes have amplified fears of a possible Iranian response, particularly threats to block the Strait of Hormuz, a narrow chokepoint through which nearly 20% of global crude oil and liquefied natural gas flows. Energy markets have long feared that any disruption here could trigger a severe supply crunch. 'Concerns remain over whether supplies through the Strait of Hormuz would be blocked. Refiners are keeping a close watch and looking for alternate sources in case supplies through the strait are halted," said an official with a state-run oil marketing company. Read this | Mint Explainer | Strait of Hormuz: Will Iran shut the vital oil artery of the world? Iran currently produces about 3.3 million barrels per day (mbd) of crude oil, exporting 1.8-2.0 mbd. While Iranian oil facilities have reportedly been hit, the extent of damage remains unclear. But the larger risk lies in a broader regional conflict that could pull in other major oil producers in the Gulf, said ratings agency Icra Ltd in a recent report. India could face significant cost pressures even though it no longer buys oil directly from Iran due to US sanctions. Crude supplies from Iraq, Saudi Arabia, Kuwait and the United Arab Emirates, all routed via the Strait of Hormuz, account for nearly half of India's total imports. About 60% of its natural gas imports also pass through this critical passage. Since 13 June 2025, when the Israel-Iran conflict began, crude prices have risen from $64-65 per barrel to $74-75 per barrel. Oil is likely to average around $70-80 a barrel in FY26, and a sustained rise from current levels risks a reduction in India's growth forecasts, Icra Ratings Ltd had said on Friday. Read this | India concerned about crude oil supply disruptions in Strait of Hormuz as prices surge after Israel's attacks on Iran 'A sustained flare-up in the conflict poses upside risks for estimates of crude oil prices, and India's net oil imports and the current account deficit. A $10/bbl increase in the average price of crude oil for the fiscal will typically push up net oil imports by ~$13-14 billion during the year, enlarging the CAD (current account deficit) by 0.3% of GDP," Icra noted. India's import bill in FY25 stood at $137 billion, according to the Petroleum Planning & Analysis Cell. "Impact on the import bill will depend on how long the elevated prices sustain. However, a 10% increase in crude prices may lead to a 3% increase in the import bill given that crude oil comprises about 30% of India's total imports. With this, the trade deficit may increase to 0.1-0.2% of GDP. There would be some pressure on the currency but an impact on GDP is not seen as of now," said Madan Sabnavis, chief economist at Bank of Baroda. Icra had also said that changes in crude oil prices are likely to translate faster into higher wholesale and consumer inflation. For every 10% increase in crude oil prices, wholesale inflation could rise by 80-100 basis points, while consumer inflation may increase by 20-30 basis points, depending on the extent of pass-through into retail fuel prices. 'Only about 8% of the energy supplies moving through the strait can be rerouted via alternative corridors," said Prashant Vashisht, vice president at Icra. "If the strait is blocked, India would have to source more from regions like Russia and Nigeria." On Friday, Brent crude futures on the Intercontinental Exchange closed at $77 a barrel, down 2.33% amid earlier uncertainty over US military involvement. Oil market volatility is expected to spike when trading resumes, said Rahul Kalantri, vice president for commodities at Mehta Equities. 'We expect a knee-jerk rally potentially pushing Brent to the $80–$85 range or beyond if further conflict escalates," he said, adding that a full blockade of the Strait could drive prices 10–20% higher. Also read | Oil is warming up, but India's inflation may escape the heat Earlier this month, JP Morgan had warned that a major escalation could push crude oil prices as high as $120 a barrel. However, the bank noted that so far, despite multiple historical threats, the Strait of Hormuz has never been fully closed. 'Crucially, for all of recorded history, crude oil continued to flow," JP Morgan wrote. The Indian government is closely monitoring the evolving situation. The petroleum ministry has held consultations with oil marketing companies to assess the state of domestic supplies and build contingency plans.
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Business Standard
09-06-2025
- Business
- Business Standard
Icra projects 6-8% growth for hospitality, downgrades outlook to 'stable'
Growth of India's hospitality sector is expected to "normalise" at 6-8 per cent in the current financial year, rating agency Icra said on Monday while downgrading the sectoral outlook to "stable" from positive. The rating agency also stated that foreign tourist arrivals (FTAs) to India are expected to remain muted in the next few months in the aftermath of the terror attack at Pahalgam in Jammu and Kashmir, but are estimated to witness a gradual recovery thereafter. However, domestic tourism has been the prime demand driver so far and is likely to remain the same in the near term. Factors, including improvement in infrastructure and air connectivity, favourable demographics, and anticipated growth in large-scale MICE events, with the opening of multiple new convention centres in the last few years, will support the growth over the medium term, Icra said. According to the rating agency, the domestic hospitality sector's earnings and credit metrics are expected to remain stable in FY2026 with benefits from cost rationalisation measures and operating leverage. A "stable" outlook indicates a low likelihood of change in the near to medium term, whereas a "positive" outlook suggests a high probability of an upgrade in the near to medium term. The rating agency estimates pan-India premium hotel occupancy to hold at 72-74 per cent in FY2026, slightly higher than the 70-72 per cent levels witnessed in FY2024 and FY2025. The average room rates (ARRs) for premium hotels are projected to rise to Rs 8,200-8,500 in FY2026, after a healthy Rs 8,000-8,200 in FY2025 amid lagging supply additions and several hotels undergoing renovation, refurbishment and upgradation, the ratings agency said. "After three years of strong demand, driven by favourable domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel, the growth in the Indian hospitality sector is forecast to normalise at 6-8 per cent YoY in FY2026," Jitin Makkar, Senior Vice President and Group Head - Corporate Ratings, Icra Ltd, said. "While the terror attacks in April 2025 and consequent heightened uncertainties in North and West India in May 2025 had led to a surge in cancellation of travel/MICE, the impact has been largely temporary and localised. In recent weeks, there has been a healthy recovery in sentiments following the abatement of the conflict," Makkar added. Icra's sample set, comprising 13 large hotel companies, is likely to report range-bound operating margins of 34-36 per cent for FY2026, despite a lower revenue growth. The margins will remain supported by factors like cost-rationalisation measures and asset-light expansions in recent periods. However, within the sample, it is likely to be a mixed bag, depending on renovations and an increase in employee expenses amidst growing demand. "Land availability issues currently constrain supply addition in the premium micro-markets in metros and larger cities. The addition to premium hotel supply in these areas is largely on account of rebranding or property upgradation, and the greenfield projects are largely being initiated in the suburbs," Makkar said. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Mint
28-05-2025
- Business
- Mint
India's power demand to grow 5.5% in FY26: Icra
New Delhi: Power demand is expected to grow 5-5.5% in the current fiscal year, according to estimates by Icra Ltd. Although this is higher than the 4.2% growth last fiscal (FY25), it would be slower than the 7-9% growth seen in FY 2022-24. The projected growth is lower than expected GDP growth for this fiscal year at 6.5%. Analysts suggest that had the country not seen an early onset of the monsoon, the power demand would have been much closer to the GDP growth rate. "Icra projects the full-year demand growth for FY2026 at 5.0-5.5%, lower than its expectation for the GDP growth for this fiscal (6.5%). This is owing to the early onset of the monsoon and expectations of an above average monsoon, which dampens the demand for cooling as well as demand from the agriculture segment. While the demand growth in FY2026 is expected to be higher than the 4.2% reported in FY2025, it is expected to trail the over-8% growth seen during FY2022-2024," said a statement from Icra. It said the total generation capacity addition in FY25 may reach 44 GW, including both thermal and renewable, logging a 29.41% increase compared with 34 GW in FY24, with the overall installed power generation capacity reaching close to 520 GW by March 2026. The rating agency also projected the all-India thermal plant load factor (PLF) level to remain flat at 70% in FY2026 against 69.5% in FY2025. PLF measures how efficiently a plant utilizes its capacity. Icra attributed this increase in PLF to the growth in generation expected from renewable sources and 9-10 GW capacity addition expected in the thermal segment in FY2026. 'Over the next five years, Icra expects the electricity demand to achieve a healthy compounded annual growth rate CAGR of 6-6.5%, higher than the 5% CAGR achieved over the past decade, driven by the demand from rising adoption of electric vehicles, green hydrogen and the increase in data centre capacity,' said Vikram V, vice president & co-group head - corporate ratings, Icra. The thermal segment is expected to add 9-10 GW capacity in FY2026, with the balance largely contributed by renewables. While renewable energy would remain the key driver of the generation capacity addition going forward, Icra said thermal has seen an increase in under-construction capacity over the past 12 months and currently stands at over 40 GW. The statement also noted that the coal stock for domestic power plants is at a five-year high at around 20 days as of 21 May 21, following improved supply and a slowdown in thermal generation growth. It said distribution companies' losses at the all-India level had witnessed a decline in FY2024 over FY2023, led by higher tariff and subsidy along with the revenue grants from state governments to fund previous year's losses. However, the gap between the cost of supply and tariff realization persists across most states. Moreover, the gross debt for state-owned discoms' witnessed a sharp increase to Rs. 7.4 trillion as of March 2024 from Rs. 6.6 trillion in March 2024, driven by debt availed to clear the past dues to generators and to fund working capital and capex amid continued losses, it said, adding that such high debt levels are unsustainable for discoms, given their current revenues and profitability. Commenting on the distribution segment, Vikram V said: 'Icra's outlook for the power distribution segment remains negative amid limited tariff hikes and continued loss-making operations. The progress in the smart metering programme along with the timely implementation of fuel & power purchase cost adjustment framework would play an important role in improving the discom finances, going forward.'
Mint
28-05-2025
- Business
- Mint
Insolvency board revamps reporting of bankruptcy resolution process to ease compliance burden
New Delhi: Insolvency and Bankruptcy Board of India (IBBI) has revamped the reporting and monitoring of corporate bankruptcy proceedings to cut red tape, enable auto-population of electronic forms and ease compliance burden, showed an official order. IBBI has been taking steps to improve the efficiency of debt resolution, cut down delays, and seamlessly make information about the resolution process available to stakeholders. The government is also building a tech platform that will connect all stakeholders involved in bankruptcy resolution, including tribunals, creditors, and policymakers. The new protocols brought out on Tuesday reduce the number of forms to be filled from nine to five and will be applicable from 1 June, but there will be no penalty in the September quarter for any default in timely filing as part of a transition arrangement, the order said. As part of the changes, a new standardised monthly reporting cycle replaces the existing event-based reporting dates. In the new regime, details of various debt resolution proceedings have to be filed on or before the tenth day of the subsequent month, except in the case of approval of a resolution plan or liquidation by the tribunal, which has to be reported within seven days of such a decision. IBBI said the new forms will be made available on its website on 1 June. No penalty will be levied on delayed filing of forms, if any, during the September quarter in order to facilitate the professionals handling the bankruptcy case to familiarise themselves with the new forms and to resolve any technical issues, the regulator said. The set of forms have to be filed on an electronic platform to be hosted on the regulator's website. The consolidation of forms has been achieved by removing duplications, streamlining data requirements, and leveraging technology for auto-population of information already available on portal, IBBI stated. Rating agency Icra Ltd. said on Wednesday that since the introduction of the Insolvency and Bankruptcy Code (IBC) in 2016, 8,308 corporations have been admitted in tribunals for debt resolution, of which 61% have been resolved either through a successful resolution plan or by withdrawal of the case or by liquidation by end of March 2025. The IBC, despite its shortcomings, continues to deliver better realisations for creditors over other recovery modes, the Icra report quoted Manushree Saggar, senior vice president and group head, Structured Finance Ratings. 'Historically, resolutions from the IBC have been plagued by long resolution timeframes, high share of liquidations and sizeable haircuts. While FY25 was a positive year with improved realisations, the overall resolution time remains a cause for concern,' said Saggar. Almost 78% of the ongoing corporate insolvency resolution cases have exceeded 270 days, post admission by the National Company Law Tribunal as on 31 March, 2025, Saggar added. Some of the recent judgments reinforce the need for timely and transparent resolution, thereby putting greater onus on the Committee of Creditors (CoC) and the NCLT, Saggar said. IBC's workings recently became a subject of public debate after the Supreme Court on 2 May rejected the debt resolution plan of Bhushan Power & Steel Ltd (BPSL) that was approved by NCLT in 2019 and was upheld by an appeals tribunal in the subsequent year. However, on Monday, the apex court stayed the liquidation process and ordered status quo.
