For a growing company, there comes a point when bank lending alone no longer fits the ambition. The funding requirement is larger, the tenor longer, or the terms more rigid than the business can comfortably carry. This is the moment many CFOs and promoters begin to look seriously at the debt capital markets.
Raising capital through bonds and debentures is one of the most established ways for Indian companies to fund growth, refinance existing debt, or diversify their sources of funding beyond the banking system. Yet for first-time issuers, the process can seem opaque. This is a practical walk-through of how it actually works — and where an experienced arranger makes the difference.
LKP has operated in India’s debt capital markets since 2002, helping corporates and institutions raise capital through bonds and debentures with discipline and discretion. Here is the path, step by step.
Why Companies Choose Bonds and Debentures
Before the mechanics, it helps to be clear on why an issuer would take this route at all.
Bonds and debentures allow a company to borrow directly from a wide pool of investors rather than relying on a single lender. That brings several practical advantages: access to larger amounts of capital, the ability to lock in funding for longer tenors, and the chance to negotiate terms that suit the business rather than accepting a standard banking template.
Just as importantly, a successful issuance diversifies a company’s funding base. Depending on a small group of banks concentrates risk; building a relationship with the bond market gives an issuer an additional, repeatable channel to return to over time. For many companies, that strategic independence is reason enough to begin.
Understanding the Instruments
The terms are often used loosely, so it is worth being precise.
A bond is a debt instrument under which the issuer borrows from investors and commits to pay interest — the coupon — and to repay the principal at maturity. A debenture is, in the Indian context, the most common form of corporate bond, and these are frequently issued as Non-Convertible Debentures (NCDs) — instruments that remain debt throughout their life and are repaid rather than converted into equity.
Issuers can also structure instruments as secured or unsecured, depending on whether specific assets are pledged against the borrowing, and can shape features such as tenor, coupon type and repayment schedule to match the company’s cash flows. This flexibility is one of the quiet strengths of the debt capital markets: the instrument can be built around the business.
The Two Main Routes to Market
When an Indian company decides to issue, it generally chooses between two approaches.
Private Placement
In a private placement, the company offers its bonds or debentures to a select group of qualified institutional and sophisticated investors rather than to the general public. This is the route most corporates take, and for good reason. It is typically faster, involves a more streamlined process, and allows the issuer to engage directly with a known set of investors — banks, insurers, mutual funds, family offices and other institutions.
Private placement suits companies that want efficiency and discretion, and it is where the relationships and reach of an arranger matter most. Placing an issue well is not about broadcasting it widely; it is about matching it precisely to the investors most likely to want it.
Public Issue
A public issue offers the instrument to retail and other investors at large, through a more extensive regulatory and disclosure process. It can broaden the investor base considerably, but it carries greater procedural demands. For most growth-stage corporates, private placement is the more practical first step into the market.
How the Process Works in Practice
While every transaction has its own character, a typical bond or debenture issuance moves through a recognisable sequence.
Assessment and structuring. The starting point is understanding the company’s funding requirement, cash flows and objectives, then shaping an instrument — amount, tenor, coupon structure and security — that fits. Getting this right at the outset shapes everything that follows.
Credit rating. Most corporate debt issuances in India are rated by a recognised credit rating agency. The rating gives investors an independent view of credit quality and is central to how the issue is received and priced.
Documentation and compliance. The transaction is supported by a set of legal and regulatory documents prepared in line with the applicable framework. Sound documentation protects both issuer and investor and keeps the process clean.
Investor engagement and book-building. This is where an arranger’s network comes into its own. The opportunity is taken to relevant investors, demand is gauged, and through a book-building process the issue is sized and priced according to genuine market appetite — rather than guesswork.
Allotment and settlement. Once the book is built, the securities are allotted to investors and the transaction is settled, with funds reaching the issuer. The relationship, ideally, does not end there — a well-handled first issue lays the groundwork for the next.
Why the Choice of Arranger Matters
The difference between a smooth, well-priced issuance and a difficult one often comes down to the arranger. Raising capital through bonds and debentures is as much about access and judgement as it is about process.
An experienced arranger brings genuine relationships with the institutional investors who buy corporate debt, a feel for how to structure and time an issue, and the discipline to manage documentation and execution without missteps. For a CFO or promoter approaching the market — particularly for the first time — that combination turns an intimidating exercise into a manageable, even repeatable, one.
Partner With LKP on Your Next Issuance
As a SEBI-registered Category I Merchant Banker with deep roots in India’s fixed income markets, LKP helps companies raise capital through bonds and debentures with the structuring expertise, institutional reach and execution discipline that a successful issuance demands. We work closely with CFOs and promoters to design the right instrument, reach the right investors, and build durable access to the debt capital markets.
If your company is considering a bond or debenture issuance, the right conversation starts well before the transaction does.
Speak with the LKP debt capital markets team to explore your capital-raising options.
This article is for general informational purposes and does not constitute financial, legal or investment advice. Any capital-raising transaction is subject to applicable regulations and market conditions.
