Retail investors start to warm up to corporate bonds post SEBI reforms: Grip's Nikhil Aggarwal

Time of India

28-07-2025

India's
fixed income
landscape is undergoing a silent transformation. Once dominated by institutions and high-net-worth individuals, the corporate bond market is now beginning to attract the attention of retail investors — thanks in large part to recent regulatory reforms by SEBI.
Nikhil Aggarwal, Founder & Group CEO of Grip, explains how measures such as the reduction in minimum ticket sizes, improved transparency, and digital access are driving wider participation.
As traditional instruments like FDs lose their edge, retail investors are finally exploring
corporate bonds
for better yield, safety, and diversification. Edited Excerpts –
Q) Historically, how has a rate cut cycle influenced corporate bond issuance in India?
Explore courses from Top Institutes in
Please select course:
Select a Course Category
Data Science
Design Thinking
Product Management
healthcare
Digital Marketing
Artificial Intelligence
Others
Management
Leadership
Data Science
MBA
Project Management
CXO
Operations Management
PGDM
Data Analytics
Cybersecurity
Finance
Degree
Public Policy
others
Technology
Healthcare
MCA
Skills you'll gain:
Data Analysis & Interpretation
Programming Proficiency
Problem-Solving Skills
Machine Learning & Artificial Intelligence
Duration:
24 Months
Vellore Institute of Technology
VIT MSc in Data Science
Starts on
Aug 14, 2024
Get Details
Skills you'll gain:
Strategic Data-Analysis, including Data Mining & Preparation
Predictive Modeling & Advanced Clustering Techniques
Machine Learning Concepts & Regression Analysis
Cutting-edge applications of AI, like NLP & Generative AI
Duration:
8 Months
IIM Kozhikode
Professional Certificate in Data Science and Artificial Intelligence
Starts on
Jun 26, 2024
Get Details
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
No one would believe how you can use plastic bottles at home!
Story to Hear
Undo
A) The current decrease in interest rates is increasing the appeal of bond issuances for government entities and companies to raise debt.
Corporates are increasingly turning to the bond market, with a higher preference for short-term bonds, as banks have been slow in passing on previous rate cuts.
Bonds Corner
Powered By
Indian rupee, bond markets cautious in week dominated by Fed, tariffs
This week, the Indian rupee and government bonds are set to respond to various factors. These include the U.S. Federal Reserve's policy decision and the August 1 tariff deadline. Traders are likely to be cautious. Investors will closely monitor Fed Chair Powell's comments. Data on the U.S. labor market and inflation will also be key.
EM debt hedge funds play safe amid rally
Retail investors start to warm up to corporate bonds post SEBI reforms: Grip's Nikhil Aggarwal
India's ESG bond market picks up as global and domestic push align: Vineet Agrawal of Jiraaf
10 year yield spikes amid a decline in bets on August rate cut
Browse all Bonds News with
According to a primary database, corporations issued ₹61,200 crore in in up to five-year bonds in May 2025, which is about three times the amount of money raised for the same period in May 2024.
Live Events
Historically, periods of declining interest rates in India have seen a surge in bond issuances. For instance, in 2020-2021, when
RBI
cut rates aggressively, corporate bond issuances rose to record levels as issuers locked in lower borrowing costs.
According to statistics from Prime Database, Indian companies raised ₹987 Bn ($11.68 billion) through bond sales in April 2025, attracted by the relative comfort of the local markets and alluring interest rates. That was the highest on record for the first month of a financial year.
The market broadly anticipates that the
Reserve Bank of India
(RBI) will reduce policy rates further in the coming months, as inflation remains contained.
Bond issuance is anticipated to be further stimulated by lower rates, which will also increase the value of existing bonds with greater yields, thereby benefiting investors through capital appreciation.
Q) With rate cuts expected, do you foresee a significant uptick in corporate bond issuance in the coming quarters?
A) Corporate bond issuance in India is expected to see a significant increase in the coming quarters, driven by a series of recent and anticipated rate cuts by the RBI.
In its continuous attempts to boost economic recovery and revive credit demand, the RBI has enacted a number of repo rate cuts in 2025, including a 25-basis point cut in April that brought the rate down to 6.00%, following an earlier cut in February. This is lowering the borrowing costs for companies.
As inflation cools and monetary policy turns accommodative, more corporates are tapping the bond market to refinance existing high-cost debt, fund capex and working capital needs. In FY25, companies raised over ₹9.9 Trillion through corporate bonds, reaching a record high.
Furthermore, with strong liquidity and investor interest for higher-yielding products, market circumstances may be quite supportive of increased primary bond activity in the coming quarters.
Q) There's been a pick-up in short-term corporate bond issuance recently. What's driving this trend?
A) With the recent interest rate cuts, the short-term secured bonds have grown in popularity among investors. Short-term bonds expiring within five years accounted for more than half of the new bond-securitised debt issued in May, up from one-third in April.5 Following factors can be attributed driving this trend:
a. Rate cut anticipation: Companies are opting for shorter maturity bonds to avoid locking in at current rates in the anticipation of rate cuts when cheaper financing could be available.
b. Liquidity Infusion: Since late 2024, the RBI's actions to increase banking system liquidity have primarily benefited non-banking financial companies (NBFCs), allowing them to borrow more through short-term bonds.
c. Yield Advantage: Short-term secured bonds now yield much more (up to 80 basis points) than similar government securities, making them appealing to businesses and investors.
d. Hedging Against Uncertainty: As the long-term interest rate trajectory and macroeconomic environment remain unpredictable, issuers and investors choose short-term instruments.
e. Flexible Funding: Short-term bonds provide for quick refinancing or bridge funding without tying in money for an extended period.
Q) Are retail investors showing interest in short-term corporate bonds or is demand largely institutional?
A) Till 2023 this market saw limited participation from retail investors with 99.5% of the market being driven by institutional investors. The primary barrier being a minimum investment amount of INR 10 lakhs.
While institutional investors still dominate the short-term corporate bond space, retail participation is gradually increasing. Recent regulatory changes by SEBI in 2023 have transformed the fixed income investment landscape, making it far more accessible and attractive for retail investors.
Note: Excluding transaction sizes greater than 50L (which could indicatively fall into institutional transactions)
Agencies
Key enablers include:
• Low Minimum Investment Amount: Minimum investment thresholds were significantly reduced, with most listed bonds now accessible for ₹10,000 with some bonds also available at ₹1,000, encouraging broader participation.
• Greater Transparency: Issuers are now subject to stricter credit rating and disclosure norms, empowering investors to make well-informed decisions using independent reports.
• Secure Settlements: All investments are enabled only via the stock exchange with T+1 settlement in the clients' demat accounts.
• Enhanced Liquidity for Clients: Introduction of demat settlements via exchanges has increased liquidity, allowing investors to exit investments more easily.
• Tax Incentives: TDS on bonds has been exempted up to ₹10,000 annually per issuer.
Q) ESG bond issuance has been rising in India. What's driving the growing popularity of these instruments? What sectors are leading India's ESG bond issuance?
A) The green bond market has experienced significant growth in the last several years, with positive year-over-year growth every year since 20118. In 2024, globally, the green bonds market achieves record levels of issuance and outperformed the conventional bond market by close to 2%.
In India, the momentum picked up after SEBI issued green bond guidelines in 2017. The Government of India began issuing
Sovereign Green Bonds
(SGrBs) in FY 2022-23, raising a total of ₹57,697 crore through FY 2024-25.
Indian mutual funds, banks, and insurance companies are increasingly integrating ESG considerations into their portfolios, driven by regulatory encouragement and global best practices.
Investors are also drawn by the dual promise of measurable social, environmental impact and financial stability provided by SEBI's strict disclosure and verification requirements.
Several renewable energy leaders (Azure Power, ReNew, Adani Green, etc.) have issued green bonds, and others are entering the sustainability bond space.
The recent introduction of SEBI's ESG and sustainability-linked bond framework is expected to unlock new capital-raising opportunities across a range of sectors.
The following categories of issuers are especially well-positioned to benefit from and drive this evolving market:
a. Infrastructure and Construction: Companies engaged in large-scale infrastructure projects such as urban transport systems, highways, smart cities, water supply, and sanitation are strong candidates for ESG or sustainability-linked bond issuances.
b. Renewable Energy and Clean Technology: Firms operating in solar, wind, hydro, bioenergy, energy storage, and electric mobility stand to benefit the most. These sectors directly contribute to India's Nationally Determined Contributions (NDCs) and net-zero targets, making them ideal for green bond issuance.
c. Affordable Housing, Healthcare, and Social Infrastructure: Issuers involved in building affordable housing, healthcare facilities, sanitation, education infrastructure, and gender-focused programs are natural fits for social bonds and sustainability-linked instruments.
d. Financial Services (BFSI): Banks and non-banking financial companies with established ESG policies are well-positioned to issue ESG bonds or serve as intermediaries, channeling funds to underlying green and social projects.
e. Large Listed Corporates: Publicly listed companies already complying with SEBI's Business Responsibility and Sustainability Reporting (BRSR) requirements particularly those in the top 1,000 listed entities are better equipped to meet the data, disclosure, and governance demands of ESG bonds.