The Sebi move asking large firms to manage a fourth of their long-term funds from the bond market will result in incremental issuances of up to Rs 50,000 crore in five years, a report said Thursday.
The Securities and Exchange Board of India (Sebi) has asked listed companies having outstanding borrowings of over Rs 100 crore and rating of AA or more to raise 25 per cent of their incremental borrowings through corporate bonds from April 1, 2019.
"About Rs 40,000-50,000 crore of additional corporate bond issuances are likely over the next five years ," rating agency Crisil said in its report.
It said 444 companies with an aggregate long-term borrowings of Rs 45 lakh crore fall in Sebi's definition. However, 210 of those have already been sourcing at least a quarter of their funding needs from the bond market.
The remaining 234, who hold Rs 6 lakh crore in long-term debt, will be the ones driving the incremental issuances, the agency said.
Crisil president Gurpreet Chhatwal welcomed the Sebi move, saying it will help deepen the bond markets and usher a risk-based pricing culture.
Over Rs 2 lakh crore more in issuances is possible if Sebi dilutes on the rating to A and above, he added.
"Going down the rating spectrum in terms of issuances is expected to be a gradual process because the market needs to absorb the incremental supply," said Somasekhar Vemuri, senior director, Crisil.
Pensions and insurers will also have to be empowered to invest in 'A' rating category bonds, he added.
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