Indian companies are increasingly issuing longer-dated bonds amid a surge in institutional demand, driven by liability matching and shrinking yield spreads, signalling a potential shift in borrowing patterns.
Indian companies are moving further out on the maturity curve as insurers and pension funds continue to buy long-dated paper and the gap between short and long-term yields has narrowed, according to bankers and investors cited by The Hindu BusinessLine. The shift has made near-term borrowing less attractive, while the appetite for longer-dated assets has remained firm because of liability-matching needs and growing fund sizes.
Over the past four days, four state-run borrowers have raised ₹12,000 crore through bonds with maturities of 10 years or more, the paper reported. Power Finance Corp and REC each raised ₹2,500 crore through 15-year and 10-year bonds, respectively, while Bajaj Finance raised ₹5,000 crore in 10-year notes and Cholamandalam Investment sold ₹2,000 crore of perpetual bonds with a 10-year call option. Cholamandalam’s move comes on top of broader demand for longer-dated debt from institutional buyers.
The rally in demand has also been helped by limited supply. According to The Hindu BusinessLine, premiums on Power Finance Corp and REC bonds over comparable government securities have fallen to 18-month lows, while New Delhi has cut the share of ultra-long bonds in its borrowing plan for the first half of the fiscal year. State borrowing has also eased after heavy issuance in the January-to-March period, adding to the imbalance in favour of long-dated corporate paper.
Vinay Pai of Equirus Capital said the demand for long-duration assets is being driven mainly by the rising size of insurers’ and pension funds’ investible pools, along with the need to match long liabilities. Sachin Bajaj of Axis Max Life Insurance said lighter state supply has supported longer-dated paper. But not everyone sees a lasting change: Vidya Iyer of ICICI Prudential Life Insurance said the latest deals do not point to a structural shift, arguing instead that they are being absorbed by investors with specific requirements.
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