Corporate Bond Issuance in Batches Can Enhance Liquidity for Smaller Entities: Shriram Finance Insights

Deepening India's Debt Market: Issuances in Bunches Can Help Small Entities

Issuing corporate bonds in bunches can help small and low-rated entities widen investor participation and deepen India's debt market, according to Parag Sharma, managing director and chief executive of non-bank lender Shriram Finance. Speaking at the CareEdge's Debt Market Summit 2026, Sharma suggested that issuances can be bunched up, similar to structures seen in securitization, where smaller issuers pool their issues to create larger ticket sizes for broader participation.

At present, over three-fourths of bond issuances in the corporate debt market are dominated by companies with AA and above ratings. Smaller companies, which are typically low on rating, may struggle to get the investor response because of their rating as well as the size of the issuance. Sharma emphasized that deeper participation in the debt market may also require supportive measures, such as credit enhancement, liquidity support, and stronger market-making mechanisms, similar to frameworks adopted in some developed and Asian markets.

According to a CareEdge report, outstanding corporate bond issuances increased to Rs 59 lakh crore in FY26, from around Rs 11 lakh crore in FY12, registering a CAGR of 13.1 per cent.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The non-financial commercial sector mobilized nearly Rs 45 lakh crore in FY26, of which around 65 per cent was sourced from the banking sector through non-food bank credit, 24 per cent came from other domestic non-bank sources, and the remaining 11 per cent from foreign sources.

Investors in India's corporate bond market are largely dominated by domestic institutions, with corporates accounting for around 32 per cent of total holdings, followed by insurance companies (19.5 per cent), mutual funds (12.9 per cent), and banks (9.2 per cent). Foreign participation, however, remains relatively limited, with foreign portfolio investors (FPIs) accounting for only 5.4 per cent of total holdings.

Investments in the corporate bond market remain heavily skewed towards highly rated instruments, with AAA-rated papers accounting for 58 per cent of total issuances in FY26 (as of November 2025). This was followed by AA-rated papers, which constituted 19 per cent of total issuances, while only 24 per cent of issuances were rated AA or below.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Sharma noted that while overall debt market activity remains positive and issuance sizes are increasing, institutional investors such as mutual funds and insurance companies continue to display risk aversion, with a preference for AAA-rated instruments.