Gross SGS Issuance To Reach Rs 10.5-11 Tn in FY25: Icra

The rating agency Icra has retained an estimated gross state government securities (SGS) issuance at Rs. 10.5 to 11.0 trillion in FY2025 and net SGS issuance at Rs 7.3 to 7.8 trillion.

In April 2024, the rating agency forecasted gross SGS issuance in FY2025 to be Rs 10.5-11 trillion. Based on Icra's estimate of FY2025 gross state domestic product (GSDP), it projected the aggregate net borrowing limit of the state governments at Rs 9.7 trillion for FY2025.

They are accounting for the actual SGS issuance of Rs 3.9 trillion raised in H1FY25 and presuming that the market borrowings in Q3 FY25 are in line with the indicated amount, the total borrowing in 9MFY25 would be Rs 7.1 trillion, 17 per cent higher than Rs. 6.0 trillion in 9MFY24.

After adjusting for the estimated redemptions of Rs. 2.0 trillion in 9M FY2025, the net SGS issuance is projected at Rs 5.0 trillion in 9M FY25, 22 per cent higher than Rs 4.1 trillion in 9MFY24.

During Q4 FY2024, the actual SGS issuance was at an all-time high of Rs. 4.0 trillion (33.9 per cent YoY growth), which appeared to be an aberration and a similar or higher borrowing for Q4 FY2025 may not emerge. At present, we have retained our full-year estimate of SGS issuance for FY25 at Rs 10.5 to 11 trillion. 

After adjusting for the expected issuance in 9M FY2025, Icra pegs the gross SGS issuance for Q4 FY2025 at Rs 3.4 trillion and Rs 3.9 trillion. 

Accordingly, the projected gross SGS issuance in Q4 FY2025 is 15 per cent below the Rs. 4.0 trillion raised in Q4FY24 under Scenario I, and a mild 3.1  per cent lower under Scenario II. 

With a 19 per cent increase in the SGS redemptions to Rs 1.2 trillion in Q4 FY2025 from Rs 1.0 trillion in Q4 FY2024, “We expect the net SGS issuance at Rs. 2.3 trillion and Rs. 2.7 trillion, under Scenario I and II, respectively,” Icra added.