Corporate bonds pooled in larger issues could widen participation in India debt market, says Shriram Finance CEO

Shriram Finance Managing Director and Chief Executive Parag Sharma said smaller and lower-rated firms could gain better access to India’s corporate bond market if bond issues were bundled into larger lots. Sharma said this approach could attract more investors and support a deeper debt market. Sharma made the remarks on Tuesday at the CareEdges Debt Market Summit 2026.

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Sharma said issuances could be pooled, like securitisation structures, to create bigger ticket sizes. Sharma said larger lots may draw wider participation from investors who avoid very small issues. Sharma also said deeper market access may need added safeguards. Sharma listed credit enhancement, liquidity support, and stronger market-making, like some developed and Asian markets.

Corporate bond market: Rating concentration and hurdles for smaller issuers

Market data showed most corporate bond activity stayed with higher-rated companies. Over three-fourths of bond issuances came from firms rated AA and above. Smaller firms often had lower ratings and smaller issue sizes. These factors could weaken investor demand. The CareEdge report said this concentration limited the pool for lower-rated debt.

Issuances also remained tilted towards the top rating band in FY26. AAA-rated papers made up 58 per cent of total issuances as of November 2025. AA-rated papers formed 19 per cent. Only 24 per cent of issuances were rated AA or below. The report linked this pattern to investor comfort with higher-rated debt.

Corporate bond market: Institutional limits and investor risk preferences

Rules for large domestic investors also shaped demand. Insurance companies and pension funds could invest only in instruments rated AA or above. The report said this kept issuance volumes concentrated in higher-rated categories. It also made the market narrower for lower-rated securities. Sharma said mutual funds and insurers still showed risk aversion.

CareEdge data showed the corporate bond market expanded over time. Outstanding corporate bond issuances rose to Rs 59 lakh crore in FY26. The figure was around Rs 11 lakh crore in FY12. The report said this implied a 13.1 per cent CAGR. Sharma said issuance sizes were rising and overall activity stayed positive.

Corporate bond market: Funding mix and who holds the debt

The report said the non-financial commercial sector mobilised nearly Rs 45 lakh crore in FY26. Around 65 per cent came from the banking sector through non-food bank credit. About 24 per cent came from other domestic non-bank sources. The remaining 11 per cent came from foreign sources.

Holdings in India’s corporate bond market were led by domestic institutions. Corporates held about 32 per cent of total bonds. Insurance companies held 19.5 per cent, mutual funds 12.9 per cent, and banks 9.2 per cent. Foreign participation stayed low. Foreign portfolio investors FPIs accounted for 5.4 per cent.

Sharma said bundling corporate bond issuances could help smaller issuers reach more investors. Sharma said support tools like credit enhancement and liquidity backstops could also help. The CareEdge report showed strong growth in outstanding bonds. Yet ratings, investment rules, and investor preferences continued to keep lower-rated debt less active.

With inputs from PTI