Pramod Rao: We are working towards further deepening the market for debt by raising the RFQ trading thresholds. We are also examining proposals to expand the thematic bonds to encompass social sustainability, sustainability-linked bonds, the securitized debt instruments and municipal bonds
FinTech BizNews Service
Mumbai, 9 August 2024: “Debt issuances and corporate bond issuances exceeded $105 billion and new equity issuances was about $25 billion in the last financial year underlining the depth of Indian bond markets. We are working towards further deepening the market for debt by raising the RFQ trading thresholds. We are also examining proposals to expand the thematic bonds to encompass social sustainability, sustainability-linked bonds, the securitized debt instruments and municipal bonds,” said Shri Pramod Rao, ED, Securities & Exchange Board of India at the 7th National summit and Awards on Corporate Bond Market organised by ASSOCHAM.
“We are eager to partner corporate India on sustainable finance transition and net zero goals via the bond market. We have recently introduced the norm of once listed, always listed for corporate bond issuers. So, what it means is all bonds, all issuers will indeed keep tapping the bond market. The Distributed Ledger Technology, DLP technology has also been made technology neutral to bridge the information asymmetry between issuers and debenture trustees in the system who rely on new disclosures and information flow about the status of compliance.”
SEBI remains committed to creating market infrastructure, institutions and initiatives that supports the goal of Viksit Bharat. The recent formation of AMC repo clearing jointly by the RBI and SEBI has already seen transactions in excess of 10,000 crore within a year of its formation. We expect the volume to increasing as information about availability of this repo clearing becomes widely known and greater participation occurs. The emergence of online bond platforms has led to a further democratisation of the bond market and today the corporate bond market is about 60-67% of the corporate lending book of the banks, added Rao.
Sharing the importance of corporate bond market, Shri R. Doraiswmy, MD, LIC of India, said, "While the capital bond market has been evolving, LIC has been a player in terms of particularly democratizing this, in terms of development of the nation, in terms of creating the infrastructure for the country, for now almost six decades long. We look at corporate bond development, particularly in terms of the democratization that's happening, it's a very, very important source for us to go back and use this market for the investment of all the money, and at the same time, help the market grow. So, the interest of the insurance industry, and the interest of the bond market, are converging to a great extent, in terms of meeting the needs of each other. That's how we look at it.”
“We are eager to listen to the creation of this, and the regulation of this market, is something which we are eagerly looking forward to, and I see we will be continuously working, along with the team here, as well as the various players in the bond market, for the development of that. When we look at the securitisation of that, and particularly the insurance, that the market gives us a kind of bandwidth, for us to invest in a big way,” said Doraiswamy.
On raising bonds on the IFSC platform, Shri Pradeep Ramakrishnan, ED, International Financial Services Centres Authority, said, "One of the things which I would like to clear is that you need not be physically present in the IFSC but basically to raise bonds on the IFSC, you can be present in any part of the world. In case you want to borrow in foreign currency, you can make use of the IFSC for that purpose. So, that is how we have had almost 40 odd issuers, having more than 100 odd issues which has helped raise $60 billion dollars. So, while it is new, I would also, while of course it is a bond conference, permit me to make use of this to make a pitch for the new listing regulations which talk about equity listing. So, for the first time, Indian companies can list their equity outside the country.”
I mean, at least on the IFSC, it is a foreign jurisdiction. So, we are in talks with a lot of other potential parties also to make listing a lot more sweet, and lot more appetising. But, the new listing regulations adopt a lot of international practices as far as lock in, or whether allotment of people, or there is minimum public holding are concerned. I am not able to reveal it because this is not officially out, but it will be out in the next 2-3 weeks. I would want you to keep an eye out for that particular regulation which will help a lot of unlisted companies. Of course, listed companies, there are other issues. But as far as unlisted companies are concerned, I think this will be a very good prospect, particularly if you have operations internationally, you can make use of the IFSC to raise funds, he added.
Speaking at the summit, Ms. Dimple Bhandia CGM, Reserve Bank of India said, “A well-developed corporate bond market spreads risks to a larger spectrum of investors, de-risking banks and contributes to financial stability. The Reserve Bank has along with other regulators have taken a lot of measures to develop the market and contribute to growth and stability in the country. As a country we have made impressive progress. The market is large and growing with and issuer base that is expanding. The market infrastructure we have is arguably one of the best in the world. The electronic bidding platform had enhanced transparency and is instrumental in pushing consolidation of stock.
As of 1st April this year, banks can now hold corporate bonds in their exchange portfolio. A lot of work has been done to encouraging foreign participation in the corporate bond market. A general route has been put in place where foreign investors can participate in the corporate bond market with the limitation of 15% of outstanding stock.”
Talking on investment in infrastructure, Ashwini Kumar Tewari, MD, SBI, said, "There are not many players in the market who are investing in infrastructure at the moment. Our current asset availability positions us to support infrastructure projects with a typical lifespan of 15 to 25 years. However, to maintain this level of involvement, we would need an average political stability window of 3 to 4 years. Achieving such long-term political stability is crucial, and democracy plays a pivotal role in this.
It's not just about our participation; other investors must also view the situation favourably. We are committed to continuing our mutual investments and are prepared to shoulder the associated construction risks. We are open to selling to stakeholders who are deeply invested, as this wave of infrastructure investment is still in its nascent stage in India.”
“While infrastructure investment is critical, a more effective approach could be through the bond market, which offers a more robust and relatively secure structure. However, the specific dynamics, including substitution rights, are yet to be fully defined in India. We are actively considering this option as it could create a virtuous cycle, where infrastructure projects are initially supported by banks and later transitioned to corporate investors via bonds or bond funds. Though this remains a future aspiration, we are hopeful it will materialize soon, he added.
Giving vote of thanks to the participants, Aditi Mittal, Co-chairperson, Assocham National Council for Corporate Bond Market and Director, AK Group, said, "The Indian corporate and bond markets have shown impressive growth, expanding consistently at a rate of 15-20% annually. This growth is a testament to the significant efforts made by policymakers and regulators to enhance participation and strengthen the market's foundation. Today, India's bond market stands in a robust position, underpinned by foreign exchange stability, a relatively high real interest rate, and the sheer scale of the market itself. As India advances towards becoming an economic powerhouse by 2027-28 and beyond, the bond market will be a critical driver of this transformation. It is not just a financial instrument but a dynamic force, empowering ventures across sectors, supporting infrastructure development, and enabling sustainable progress. In this evolving economic landscape, the bond market is poised to play a pivotal role in realizing India's aspirations for growth and modernization."
At the summit, a scintillating panel discussion on the “Role of Corporate Bond Market in the Development of Renewable & Infrastructure Financing” took place. The participants in the discussion were Shri Rambabu P., Co-chairman of ASSOCHAM National Council for Sustainable Finance and CSO of Greenko Group; Ms. Deepa Rath, MD & CEO of Axis Trustee Service Ltd.; Shri Rajeev Mukhija, Chief Financial Officer of India Infrastructure Finance Company Ltd.; Mr. Ashish Agrawal, Director of Resurgent India Ltd.; and Ms. Meghna Pandit, Chief Investment Officer of IndiGrid Trust.
Mr. Agrawal mentioned that in the next five years, the Government of India has drawn up large plans for infrastructure development in the country, with investments of Rs. 50 trillion, and about Rs. 11 trillion is expected to be made this year. For such large investments, corporate bonds and infrastructure bonds would be the route. Ms. Rath pointed out that the development of the infrastructure bond market as a source of funding has been discussed for a long time. However, for the financial development of the renewable energy sector, challenges such as incomplete life cycles of projects, political instability, and pricing issues have affected the sector and have created certain challenges around funding, she said.
