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regular-article-logo Monday, 20 May 2024

Bonds claim pride of place with issuances reaching over 62 per cent of overall bank lending

Speaking at a CII event on corporate governance, SEBI head Madhabi Puri Buch said if one were to compare fund mobilisation by industry in the last 12 months against the previous year, while equity issuances have shown a rise of 19 per cent, fixed income or debt has also given a strong performance

Our Special Correspondent Mumbai Published 03.04.24, 11:47 AM
Madhabi Puri Buch

Madhabi Puri Buch File picture

Bonds may be the "often forgotten child" of Indian markets compared to equities, but their velocity is not trivial, with issuances reaching over 62 per cent of the overall bank lending done in a year, Sebi chairperson Madhabi Puri Buch said here on Tuesday.

Speaking at a CII event on corporate governance, Buch said if one were to compare fund mobilisation by industry in the last 12 months against the previous year, while equity issuances have shown a rise of 19 per cent, fixed income or debt has also given a strong performance. When added together, Rs 10.5 lakh crore have been raised by the industry from the markets in the past 12 months. “This is not trivial.’’

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She further noted that real estate investment trust (REIT) and infrastructure investment trust (InvIT) will be the vehicle for future growth. The combined value of these instruments and municipal bonds will be equal to the value of the entire equity capital market which is now around one times the country’s GDP. Buch said bonds are now competing against bank finance, as well.

If one were to compare bonds outstanding to loans by banks, for every Rs 100 by a bank to a corporate, the bond market gives Rs 56. If commercial paper — a short-term debt instrument — is added, this number will cross Rs 60.

The Sebi chief, who had recently flagged expensive valuations in certain segments of the market, observed that the Indian capital markets are commanding higher valuations because of foreign investors’ optimism and trust in the country. At 22.2, the ratio of price to earning (PE) multiple in the Indian market is higher than the average of many indices around the world.

“Yes, some people say that we are an expensive market but still why is the investment coming? Because this is a reflection of the optimism and the trust and faith that the world has in India today that we are commanding the kind of multiples in our markets.”

Buch disclosed that she meets various stakeholders including foreign investors regularly and they have shown an increased interest in India because of the high velocity shown by the nation’s economy. They are encouraged by data suggesting the strength of the economy as visible in the growth in GST collections month-on-month, advance tax payouts and power and energy consumption, she said.

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