Why are Indian corporates flocking to capital markets for funding?

Synopsis

Indian corporates significantly increased their reliance on capital markets in FY25, with resource mobilization surging by 32.9% to ₹15.7 lakh crore. Debt instruments, particularly private placements, dominated the fundraising, while equity also played a substantial role. This shift reflects a move away from traditional bank lending towards cheaper and faster access to funds.

Mumbai: Indian corporates are increasingly tapping capital markets for cheaper and faster access to funds, which led to a 32.9% surge in resource mobilisation in FY25, data released by the Reserve Bank of India (RBI) showed.

Funds raised through capital markets rose to ₹15.7 lakh crore last fiscal year, compared with ₹11.8 lakh crore in FY24.

Debt dominated the fund-raising mix with a 63.5% share, almost entirely through private placements, which accounted for 99.2% of overall debt raised by companies. Equity contributed 27.4% of total fundraise while bank lending to industry slowed to just 6.9% in FY25, RBI data showed.

Agencies

This indicates how Indian corporates are steadily diversifying their funding sources, moving beyond traditional bank loans to tap into capital markets, particularly the corporate bond market and equity issuance.

Raising funds through capital markets, especially via private placements of corporate bonds, offers more competitive pricing and quicker access compared to the often lengthy and collateral-heavy bank loan process, experts reasoned.

Corporate bond net outstanding increased to Rs 53.6 lakh crore at the end of March 2025, supported by the highest-ever fresh issuance of Rs 9.9 lakh crore during 2024-25. “Secondary market remained lacklustre with average monthly turnover at 3.8% of outstanding value,” the central bank noted in the financial stability report.

“Listed private placements overwhelmingly remained the preferred route for resource mobilisation, while public issuances formed only a small fraction of total issuances.” In 2024-25, AAA-rated firms dominated corporate bond issuances with a 67.1% share, while issuers rated below AA accounted for 16% of total issuances.

Corporate bond spreads widened marginally due to tighter liquidity conditions, trade-related uncertainty, and softer growth prospects. Median spreads across rating categories were higher by 20–30 basis points, even though yields softened. Median spreads for AAA-rated firms stood at around 27 basis points, for AA-rated firms at 32 basis points, and below AA at 22 basis points.

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