The pullback was largely due to lower pricing advantage in overseas markets and abundant local liquidity, which allowed higher-rated companies to more efficiently refinance upcoming maturities through rupee-denominated bonds.
“High and volatile US government bond yields made USD financing less attractive, while deep domestic liquidity allowed high-quality issuers to refinance more efficiently in the rupee market,” said Shobhit Bahl, head of financing for India at Barclays. “From an investor perspective, exposure to India was maintained through local bonds and USD secondary markets, rather than through new primary issuance.”
Several major infrastructure, airport and renewable energy groups, such as Vedanta and GMR, opted for onshore issuance during the year, benefiting from strong domestic demand from banks, investment funds and insurers. Issuers were also able to secure longer maturities and tighter spreads in the rupee market than what was available offshore, dealers said.
ETMarkets.comIssuances will pick up again in 2026
Bankers expect offshore issuance to recover in 2026, with some expecting it to exceed $10 billion, helped by proposed reforms to India’s external commercial lending (ECB) framework, including a move to more market-determined pricing from the current ECB ceiling of 500 basis points above the benchmark. The interest rate cap is one of the main factors preventing issuers from tapping into the dollar bond market via the ECB route.
Bahl said that with higher maturities in 2026 and expectations of easing from the US central bank, conditions for offshore lending should gradually improve.
“A smaller onshore-offshore cost differential, lower interest rate volatility and tighter credit spreads would be key to more meaningful returns in the dollar bond market,” he said.
#Indian #cos #bonds #absorb #bonds #price #advantage #diminishes