ICICI Bank Ltd. has unseated Axis Bank Ltd. from its 16-year domination as the primary arranger of rupee-denominated corporate bonds, achieving a landmark feat amidst a record surge in bond sales during the previous year.
The second-largest lender in India, by market value, oversaw offerings totaling 980.3 billion rupees ($11.8 billion) in 2023, encompassing self-led transactions and constituting 17% of the total bond market, as per Bloomberg’s compiled data. Following suit, HDFC Bank Ltd. secured the second position with deals worth 797.4 billion rupees, edging past Axis Bank, which, for nearly two decades, held sway over the local-currency bond market until its relegation to the third position after arranging 763.5 billion rupees of transactions.
Neeraj Gambhir, the Group Executive and Head of Treasury, Markets, and Wholesale Banking Products at Axis Bank, emphasized the bank’s shift toward prioritizing higher fee-generating businesses over sheer volume chasing. In an interview, he indicated Axis Bank’s commitment to sustain this strategic approach, focusing on arranging deals for AA to A-rated issuers and private credit firms. Additionally, the bank aims to facilitate issuances from real estate investment trusts (REITs) and InvITs, foreseeing their escalating prominence as significant borrowers in the bond market.
However, ICICI Bank remained unavailable for comment despite an email request.
Last year witnessed businesses in India’s rapidly growing economy amassing a staggering 10.4 trillion rupees through bond sales. Gambhir anticipates a 15% upsurge in bond issuance this year, underlining the potential for companies to leverage reduced borrowing costs, should global central banks enact anticipated interest rate cuts.
Further catalyzing the corporate bond market, Gambhir alluded to forthcoming investment guidelines for banks, slated to take effect in the ensuing months. A pivotal shift occurred in September when India’s central bank allowed lenders to incorporate company notes in their held-to-maturity book, eliminating the requirement for marking-to-market against yield movements.
Gambhir forecasts a strengthening capital expenditure cycle in the latter half of the year, potentially propelling firms to tap into the bond market. He also projected that the demand for company notes will likely surpass supply, maintaining tight spreads between corporate and sovereign debt.
As ICICI Bank disrupts Axis Bank’s long-standing dominance, the Indian corporate bond landscape is poised for transformation amid evolving market dynamics and strategic maneuvers by key players.