Amidst RBI's rate cut and an improved liquidity environment, PFC and SIDBI are preparing to raise ₹11,500 crore from the bond market. Activity in the corporate bond market has increased following the policy changes, bolstering investor confidence.
PFC–SIDBI: India's corporate bond market is currently witnessing renewed activity. Market sentiment has distinctly improved following the Reserve Bank of India's recent Monetary Policy Committee meeting, which saw a 25 basis point cut in the repo rate. In this positive environment, state-owned Power Finance Corporation (PFC) and Small Industries Development Bank of India (SIDBI) are jointly preparing to raise ₹11,500 crore from the bond market. Experts believe that the current rate-cut environment and improved liquidity outlook will make it easier for companies to raise capital compared to before.
Beginning of a Revival in the Corporate Bond Market
Recent policy decisions have signaled an upswing in the corporate bond market. Investor sentiment has strengthened following the RBI's 25 basis point interest rate cut. Additionally, the central bank also announced Open Market Operations (OMO) and rupee-dollar swaps, which have boosted investor confidence regarding liquidity.
According to market analysts, the bond market could become even more active in the coming weeks. Many long-term funds and institutional investors constantly seek such opportunities where they can achieve stable and reliable returns.
PFC Previously Halted Bond Issuance
Power Finance Corporation had halted the process of issuing ₹3,000 crore worth of three-year bonds last month, specifically on November 25. At that time, corporate bond yields remained high, which led the company to take this step. Similarly, several other issuers had also opted to raise investments before policy announcements. They had hoped that long-term yields would remain stable, but disparities in market value led to the cancellation of many deals.
Now that the environment appears to be improving following the RBI's announcement, both PFC and SIDBI have re-strategized their entry into the bond market. According to experts, this is an opportune time for companies to raise capital at a lower cost.
SIDBI Also Set to Raise Substantial Funds
SIDBI is also planning to raise a total of ₹11,500 crore in conjunction with PFC. Experts in the banking and financial sector state that SIDBI had long been seeking opportunities to attract long-term funding. The reduction in interest rates has created a favorable market for it.
SIDBI's bonds will primarily attract funds known as Provident Funds, Pension Funds, and other long-term institutional investors. These institutions prefer to invest in bonds that offer stable and secure returns.
Market Experts' Analysis
Venkatakrishnan Srinivasan, Managing Partner and Founder of Rockford FinCap LLP, stated that many organizations were not planning an immediate entry into the bond market. The reason was that they were waiting for policy conditions to become clearer. Now that the RBI has announced rate cuts and liquidity support, institutions have begun preparing for issuance.
He also added that several funds are prioritizing long-term bond issuances. The goal is to attract capital from institutions like provident funds and pension funds, as these funds are currently experiencing significant inflows.
Many leading funds have already started deploying capital to meet their regulatory and asset allocation targets. This also indicates that the corporate bond market is gradually becoming active again.
Significant Activity in the Bond Market in October
In October 2025, the corporate bond market witnessed significant activity. In that month, companies collectively raised ₹17,500 crore. The largest deal was by Bharti Telecomm, which raised ₹10,500 crore through bonds in two tranches.
This demonstrates that large corporations consider corporate bonds a safe and efficient option for their funding needs. Now, with the new issuances from PFC and SIDBI, the market is likely to see further acceleration.
Why Repo Rate Cut Has Increased Expectations
A reduction in the repo rate directly impacts the cost of borrowing. Lower rates lead to:
- Decreased bond yields.
- Easier capital raising for companies.
- Increased investor appetite for safe and stable investment options.
- Improved liquidity and a conducive market environment.
- The RBI's recent announcements provide positive signals to the market in this direction.
