Corporate bond market to more than double by fiscal 2030

Capex push, attractiveness of infrastructure sector, financialisation of savings key drivers

Corporate bond market to more than double by fiscal 2030

Mumbai, December 4, 2023: After clocking a compound annual growth rate (CAGR) of ~9% over the past five fiscals, the Indian corporate bond market appears set for even faster growth. CRISIL Ratings expects outstanding size of bond market to more than double from ~Rs 43 lakh crore as of last fiscal to Rs 100-120 lakh crore by fiscal 2030.

Says Somasekhar Vemuri, Senior Director, CRISIL Ratings, “The growth will be driven by a confluence of factors. While large capital expenditure (capex) in the infrastructure and corporate sectors, growing attractiveness of the infrastructure sector for bond investors and strong retail credit growth are expected to boost bond supply, rising financialisation of household savings should drive demand. Regulatory interventions are helpful, too.”

Capex in the infrastructure and corporate sectors is expected to be driven by decadal-high-capacity utilisation, healthy corporate balance sheets and strong economic outlook. CRISIL foresees capex of ~Rs 110 lakh crore1 in these sectors between fiscals 2023 and 2027, ~1.7 times than that in the past five fiscals. CRISIL Ratings expects this pace of capex to continue past fiscal 2027. The corporate bond market is expected to finance a ~sixth of the capex foreseen.

Says Ramesh Karunakaran, Director, CRISIL Ratings, “The RBI and SEBI8 have already mandated large borrowers to tap the corporate bond market for incremental borrowings. The recent launch of the Corporate Debt Market Development Fund and the setting up of AMC Repo Clearing Ltd by SEBI will help in improving the secondary market liquidity for institutional investors and thereby boost investor confidence. Growth may get a leg up if the regulators address some key issues, such as relaxing the investment restrictions on corporate bonds rated below ‘AA’ for insurance and pension funds and fortifying the credit default swaps market.”