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Only Few Issuers Raised Funds Via Debt: Sebi Chief

New Delhi, July 22: As the corporate bond market is getting restricted to top rated bonds, only a limited number of issuers are able to raise funds via debt, chairman of markets regulator, Securities and Exchange Board of India (Sebi), Ajay Tyagi said on Wednesday.

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He emphasised on the need for more players, including institutional investors, in corporate bond markets as mutual funds are the only major active players in the segment.

Speaking at a capital market event, Tyagi said, "Data on issuance and trading in corporate bonds doesn't tell the problem of the corporate bond market getting restricted to only top rated bonds in India."

In India, about 97 per cent of the issuance and trading in the corporate bond market is in just the top rated categories, he said.

The amount of outstanding corporate bonds in India has grown from Rs 15 trillion in 2013-14 to Rs 33 trillion in 2019-20, reflecting a compound annual growth rate (CAGR) of about 14 per cent. In comparison, outstanding bank credit has grown at a CAGR of about nine per cent to Rs 104 trillion from Rs 61 trillion during the same period.

Although, corporate bond market has seen a higher growth rate over the last 5-6 years as compared to outstanding bank credit, it is still around one-third of the bank credit.

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With regard to the secondary corporate bond market, there has been an increase in trading volumes from Rs 10 trillion in 2013-14 to Rs 20 trillion in 2019-20.

"There is a dire need to move down the rating curve. There are issues on both the demand and supply sides of the equation," he added.

According to Tyagi, there is an inter-linkage between the corporate bond market and government securities (G-Sec) market.

"Typically, the pricing of corporate bond is benchmarked to that of G-Sec of corresponding maturity. However, in India, trading in G-Secs is concentrated only in the 7-10 years maturity bucket. There is a long way to go to have a continuous yield curve for G-Sec. This affects pricing of corporate bonds," he noted.

The Sebi chief said the required reforms in the corporate bond market should be brought in without any further loss of time.

He also emphasised on unifying financial markets, wherein infrastructure for corporate bond and G-Sec markets could be integrated. 

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"Having two separate ecosystems results in artificial segmentation of investors and divergent governance and regulatory norms for institutions in the two markets performing similar functions.

"The market infrastructure institutions dealing with these two type of securities should follow the same rules and regulations. The economies of scope and scale also dictate such unification," Tyagi said.

With regards to REITs and InvITs, Tyagi said there is a clear visibility of a strong pipeline of infrastructure and real estate assets to be monetised through emerging investment vehicles in near future.

Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), which enable monetisation of existing assets, have shown significant growth over the last three years and the total unit capital of such investment vehicles put together stands at more than Rs 58,000 crore, he added.

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