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Listen to this article in summarized format Since overseas yields show few signs of abating and the cost of hedging escalates amid a firming dollar, borrowing choices for Indian companies have suddenly narrowed, they said. Banks remain one of the options, but the local bond market might find immediate favour after the latest increase in policy rates-especially for smaller issues. "Some issuers that cancelled bond offerings earlier because yields were higher than their bank borrowing costs may return to the market now," said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP. "However, they may not necessarily accept the entire issue amount and could choose to accept bids only up to a level of yield they are comfortable with." Indian companies may re-enter the bond market given recent central bank measures aimed at stabilizing the rupee. High overseas yields and increased hedging costs have limited borrowing options for these businesses. Analysts suggest that some companies could reconsider bond issuances previously canceled because of excessive yields. With rising bank borrowing costs, bonds may become more appealing for certain issuers seeking flexibility. The gap between bond yields and bank lending rates varies by borrower rating and loan structure, but rising borrowing costs could make bond issuances more competitive for some companies. A large bank's external benchmark-linked lending rate (EBLR) is 8%, with even top-tier borrowers typically paying a spread of 200-300 basis points. By contrast, five-year bonds issued by AAA-rated quasi-public sector companies offer indicative yields of around 7.90%. Read more: ET Alpha Wealth Summit 2.0: What do Shah Rukh Khan and SIFs have in common? Radhika Gupta explains Bonds may also offer cash-flow flexibility, as bank loan interest is generally payable monthly, while bond coupons are often paid annually or semi-annually, depending on the terms of the issue. This could make bond funding more attractive for eligible companies seeking to manage near-term cash outflows. The RBI's intervention could therefore help contain currency volatility without changing the funding outlook much. A sustained revival in overseas issuance would require more competitive global borrowing costs and greater certainty over the rupee. The RBI has opened a special dollar window for Indian Oil, Bharat Petroleum and Hindustan Petroleum to meet their daily foreign currency requirements from Monday, diverting their dollar demand from the open market. The move comes as the rupee remains near record lows and crude oil prices stay above $100 a barrel. Read more: Weekly Market Outlook: Nifty snaps 8-week losing streak, but can bulls reclaim the crucial 200-week moving average? External commercial borrowings could continue where companies secure investors within applicable regulatory limits. However, ECBs and foreign currency bond issuances would depend heavily on international market conditions and investor demand. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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