Friday, 31 Jul, 2026
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Sustaining capital formation will ultimately require the IPO market to recover as decisively as the bond market already has
Companies raised a record Rs 3.15 lakh crore through equity, debt and business trusts, according to the NSE Market Pulse, a 122 per cent increase from May. Yet more than four-fifths of that came from debt. Bond issuance climbed 142 per cent month on month to Rs 2.59 lakh crore, while IPOs remained subdued, raising just Rs 1,900 crore across the mainboard and SME platforms. The numbers point less to a broad revival in risk appetite than to a market seizing what may prove to be a temporary financing window.
The timing is telling. The first two months of FY27 saw muted debt issuance as geopolitical tensions in West Asia pushed bond yields higher and discouraged borrowers. June brought calmer conditions and issuers moved quickly. Commercial paper issuance more than doubled to Rs 1.9 lakh crore from Rs 80,410 crore in May, while privately placed non-convertible debentures rose to Rs 69,700 crore.
The breadth of borrowers is equally significant. Development finance institutions including NaBFID, Nabard, Hudco, Sidbi and REC all tapped the market. They were joined by housing finance companies and non-bank lenders such as LIC Housing Finance, Bajaj Finance, Bajaj Housing Finance, Tata Capital, Tata Capital Housing Finance, HDB Financial Services, Sundaram Finance, Kotak Mahindra Prime and L&T Finance.
Such participation suggests this was not an opportunistic rush by a handful of large issuers. Rather, it reflects a shared assessment that current borrowing costs may not last. Issuers are locking in funding while investors, faced with uncertainty over the future path of yields, are equally willing to secure current returns. That rare alignment between borrowers and investors helps explain the record volumes.
Whether the window remains open is another matter. India’s interest-rate cycle is still evolving and global risks remain elevated. Any renewed geopolitical tensions or a shift in monetary expectations could quickly alter funding conditions. Companies appear unwilling to take that chance.
The equity market tells a more nuanced story. Total equity fundraising recovered to Rs 5,300 crore, but fresh public offerings contributed only a fraction of that. Preferential allotments accounted for Rs 22,500 crore, offer-for-sale transactions Rs 21,000 crore and qualified institutional placements Rs 7,500 crore.
That mix is revealing. Preferential allotments and QIPs largely depend on institutional investors that already know the issuers. Offer-for-sale transactions primarily enable existing shareholders to reduce holdings rather than finance corporate expansion. IPOs, by contrast, rely on broader investor confidence and stronger valuation conviction. Their weakness therefore points to continued caution despite equity markets remaining relatively resilient.
The primary market has spent much of this year contending with tariff concerns, volatility and the conflict in West Asia. Companies have responded by delaying listings rather than accepting lower valuations. June showed some improvement but hardly enough to suggest a full reopening of the IPO market.
The first quarter of FY27 underlines the point. Only eight companies listed on the mainboard, raising Rs 4,700 crore, with industrial and financial companies accounting for most of the proceeds. On NSE Emerge, healthcare companies led fundraising among SMEs. BSE SME IPO mobilisation improved sharply to Rs 940 crore in June from just Rs 50.5 crore in May, indicating that smaller issuers remain willing to test the market as sentiment stabilises.
Even so, IPO activity remained below the pace seen in the corresponding quarter of FY26. Industry participants expect a much stronger second half, supported by several large listings in the pipeline. SBI Funds Management’s market debut this month has added to optimism that high-quality issuers can still attract demand.
The decline in fundraising by real estate investment trusts and infrastructure investment trusts is another reminder that the recovery remains uneven. Reits and Invits raised just Rs 2,000 crore in June compared with Rs 5,000 crore in May. These vehicles often depend on long-term institutional capital, and their softer performance suggests investors remain selective outside conventional corporate debt.
For now, debt markets are carrying the burden of corporate financing. That is not necessarily unhealthy. Companies are prudently taking advantage of attractive funding conditions, while investors are securing yields before they potentially fall. But debt cannot indefinitely substitute for equity. Borrowing increases leverage, whereas equity provides permanent capital to finance long-term growth.
June’s record fundraising therefore deserves both applause and caution. India’s capital markets remain deep enough to absorb enormous financing needs, even during periods of uncertainty. Yet the record was driven overwhelmingly by borrowers rushing to lock in debt rather than entrepreneurs rushing to tap public equity. Sustaining capital formation will ultimately require the IPO market to recover as decisively as the bond market already has.
