The Viksit Bharat 2047 vision hinges on accessible low-cost capital for corporates across the economic spectrum. For growth and long-term stability, India must develop a vibrant and deep bond market to supplement banking channels, ensuring a steady supply of low-cost capital to corporates of all sizes through economic cycles.
India's corporate bond market increased over 50% in the past five fiscals to Rs 54 lakh crore1 as on March 31, 2025. Beneath the surface, however, this growth may not be as promising as it seems.
Data suggests ~95%2 of bond issuances are rated in the highest safety ('AAA') and high safety ('AA') categories. This skew highlights limited participation of mid-rated issuers in the bond market, despite robust growth in the overall market and the Indian economy.
Bond investors generally avoid issuances rated below 'AA'. Many of them typically club mid-rated issuances (which include the ‘BBB’ and ‘A’ categories) with those in the ‘non-investment grade’ categories (‘BB’ or below).
This can be attributed to investors' perception that credit profiles of mid-rated issuers are more volatile and carry materially higher default risk. However, this is not borne out by data. A Crisil Ratings analysis reveals that ‘A’ rated companies differentiate themselves in terms of safety and creditworthiness.
These companies provide an attractive proposition to investors in terms of safety, diversity and returns.
An analysis of the Crisil Ratings rated portfolio shows that ‘A’ rated corporates have demonstrated resilience, with low default rates over the past decade, including during the challenging business cycles of the pre-Covid and Covid years.
Their debt protection metrics (computed for non-financial corporates, excluding infrastructure and real estate companies) have been robust, with median interest coverage of 8-9 times and low gearing of about 0.3 time over the past seven fiscals, coupled with an increase in scale and size.
In fact, their one-year default rate declined sharply to 0.07% for fiscals 2015-2025 from about 0.20% for fiscals 2008-2018.
Additionally, they offer an opportunity for investors to participate in the growth narrative of the Indian economy.
Companies rated ‘A’ (non-financial corporates, excluding infrastructure and real estate companies) in the Crisil Ratings portfolio clocked median revenue growth of about 9% over the past seven fiscals, outpacing the ~4% growth of those rated ‘AA’ and ‘AAA’.
As these companies form the backbone of the expanding Indian economy, improving their access to the bond market becomes critical to the Viksit Bharat vision.
Mid-rated corporate issuances can also enable portfolio diversification for investors and broaden financial markets for long-term sustainable development.
The borrowing profiles of ‘A’-rated companies reveal a significant opportunity.
As of end-fiscal 2025, their rated long-term bank borrowings across all credit rating agencies stood at about Rs 23.5 lakh crore, with over 80% attributable to non-financial corporates, including infrastructure companies. In contrast, their bond market issuances were modest at about Rs 1.3 lakh crore over the past five fiscals.
Notably, the Crisil Ratings rated universe as of March 2025 comprised ~1,350 ‘A’ rated companies versus ~950 companies in ‘AA’ and ‘AAA’ combined, underscoring the significantly larger opportunity in the ‘A’ rated cohort.
Furthermore, ‘A’ rated issuances present a compelling case for calibrated investment, especially in the current market scenario where mid-rated bonds offer higher risk-adjusted returns than the ‘AA’ category.
For the record, ‘A’ rated bonds have historically provided 80-100 basis points (bps) higher risk-adjusted returns than ‘AA’ rated bonds.
1 Financial Stability Report, Reserve Bank of India, June 2025 2 Source: Prime Database
