In an exclusive interaction with ETMarkets, Vineet Agrawal, Co-Founder of Jiraaf, highlights how the convergence of rising global investor appetite for green assets and India’s policy-driven push—including SEBI’s BRSR Core and the RBI’s green finance guidelines—is accelerating the growth of ESG bond issuance.
With sectors like renewable energy, clean transportation, and infrastructure finance leading the charge, Agrawal believes that ESG-linked financing is rapidly becoming mainstream for Indian corporates looking to align capital raising with sustainability goals. Edited Excerpts –
India’s ESG bond market is experiencing significant growth, driven by increasing global investor demand for sustainable assets and supportive domestic policies like SEBI’s BRSR Core. Lower borrowing costs incentivize companies to raise capital more aggressively. Sectors such as renewable energy and clean transportation are leading the charge, with more Indian corporates expected to embrace ESG-linked financing.
Q) Historically, how has a rate cut cycle influenced corporate bond issuance in India?
A) Rate cut cycles have typically triggered higher corporate bond issuance in India, as lower borrowing costs incentivise companies to raise capital more aggressively. This trend has been evident in recent years.
In FY25, issuance touched a record ₹10 trillion—a 28% jump over the previous year. The momentum has continued into FY26, with ₹2.6 trillion raised in the first quarter alone.
The strong showing, amidst speculation of further rate cuts, reflects how issuers are anticipating a softer rate environment while responding to healthy investor demand.
Q) With rate cuts expected, do you foresee a significant uptick in corporate bond issuance in the coming quarters?
A) Yes, bond issuance is likely to remain strong in the quarters ahead. Historically, borrowers have front-loaded issuance to benefit from lower yields ahead of rate cuts, and we’re already seeing that pattern play out.
With inflation moderating and the RBI expected to further ease policy in the upcoming policy review, the backdrop is supportive. NBFCs, infrastructure companies, and large PSUs are expected to lead the supply, supported by ample liquidity and tightening credit spreads.
The record ₹10 trillion raised in FY25 suggests that this is not just a cyclical spike, but part of a broader, deeper development of India’s corporate bond market.
Q) There’s been a pick-up in short-term corporate bond issuance recently. What’s driving this trend?
A) Several factors contribute to the rise in short-term issuances, particularly those in the 3–18 month range. First, a flatter yield curve has narrowed the benefit of borrowing long-term, prompting issuers to go short and refinance later.
Second, with rate cuts on the horizon, companies are avoiding locking in higher long-term rates at this time.
ICRA data indicate a notable rise in sub-three-year bonds, particularly from NBFCs and housing finance companies.
On the demand side, treasury desks, family offices, and short-duration debt funds are actively seeking quality short-term paper, driving this momentum.
Q) Are retail investors showing interest in short-term corporate bonds or is demand largely institutional?
A) Institutional investors—such as banks, mutual funds, and insurance firms—still dominate the short-term bond segment.
However, retail interest is gradually picking up, primarily through SEBI-registered Online Bond Platform Providers (OBPPs). These platforms have made it easier for individual investors to access short-term, rated bonds in smaller ticket sizes.
Q) ESG bond issuance has been rising in India. What’s driving the growing popularity of these instruments? What sectors are leading India’s ESG bond issuance?
India’s ESG bond market is gaining momentum, fuelled by rising global investor interest in sustainable assets and supportive domestic policies.
Regulatory pushes, such as SEBI’s BRSR Core and the RBI’s green finance guidelines, have also played a role. Sectors such as renewable energy, clean transportation, and infrastructure finance are leading the way.
A notable milestone was L&T’s ₹500 crore ESG bond—its first—highlighting that even large conglomerates are aligning with sustainability-linked financing. As ESG considerations become mainstream, more Indian corporates are expected to follow suit.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
