Startup IPO Boom on the Horizon: India Eyes $100 Billion in Listings by 2027

India’s equity landscape is poised for a massive transformation, with over 3 dozen tech startups preparing for initial public offerings (IPOs) by 2027. According to a report, this new wave of public listings is valued at approximately $100 billion, marking a significant revival in India’s capital markets.

A Line-up of High-Profile IPO Contenders

Leading this surge are some of the country’s most prominent startups. Among them are Flipkart—supported by Walmart, digital payments leader PhonePe, and hospitality platform Oyo Hotels. These companies are preparing to tap into India’s robust public markets, which were the world’s second-largest for share sales in 2023 before experiencing a decline.

These upcoming IPOs suggest renewed confidence in the public markets after a subdued phase. A key difference this time, according to an Indian investment bank, is that many of the startups aiming to list are financially stronger compared to those that went public during the 2021–2022 boom. During that earlier cycle, several newly listed firms struggled to maintain their valuations. For instance, Paytm lost nearly 63% of its value, while Nykaa slipped about 4% post-listing.

Challenges in a Volatile Market Environment

Despite the enthusiasm for these upcoming offerings, the IPO market is not without challenges. India experienced a 34% drop in the number of share sales in the first quarter of 2025. This decline has been attributed to heightened market volatility, slowing economic growth, and downward revisions in corporate earnings.

The benchmark NSE Nifty 50 Index, after nearly a decade of gains, began to falter in late 2024. Consequently, IPO proceeds—including block deals and share placements—fell sharply, reaching only $7.1 billion in the first quarter. This figure positioned India behind other Asian markets such as Hong Kong and Japan.

Nevertheless, analysts remain optimistic about a market rebound. Notable upcoming deals include a $1.7 billion IPO by LG Electronics’ India division and a $400 million listing from electric two-wheeler maker Ather Energy.

Exit Avenues for Major Global Investors

A revival in IPO activity would also offer much-needed exit opportunities for major venture capital and private equity investors. Entities such as SoftBank Group Corp. and Prosus NV have invested heavily in India’s startup ecosystem and stand to benefit from these public listings.

SoftBank’s Vision Fund, for example, has significant stakes in Oyo, Lenskart, and used-car platform CARS24. Meanwhile, Prosus has backed e-commerce player Meesho and home services provider Urban Company. For such investors, successful IPOs would not only validate their long-term strategy but also provide capital to redeploy into new ventures.

Conclusion

While India’s IPO market has faced turbulence, the pipeline of over $100 billion in startup listings represents a major shift in investor sentiment and startup maturity. As companies prepare to test the public waters once again, the coming years could redefine India’s position in global capital markets—provided they navigate the challenges that lie ahead.

 

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Hindustan Copper and CODELCO Sign Strategic Agreement

Hindustan Copper Limited (HCL) has recently signed an agreement with Corporación Nacional del Cobre de Chile (CODELCO), marking a significant step in fostering international cooperation in the mining sector. This collaboration aims to facilitate the exchange of expertise and technical know-how between the two entities, enhancing their capabilities in mineral exploration and processing.

Enhancing Mining Exploration and Development

The agreement between HCL and CODELCO is primarily focused on identifying and executing joint initiatives in the field of mining exploration and exploitation. By leveraging each other’s strengths, the companies seek to improve their operational efficiency and broaden their resource base. 

This partnership will allow them to explore new mineral deposits and adopt innovative mining technologies that align with global industry standards. The collaboration also ensures that both companies remain competitive in the rapidly evolving mining landscape.

Knowledge Exchange and Strategic Benefits

A key aspect of this partnership is the mutual sharing of technical knowledge and best practices. CODELCO, being one of the world’s largest copper producers, brings extensive experience in large-scale mining operations, which HCL can benefit from. 

Conversely, HCL’s deep understanding of the Indian mining sector presents valuable insights for CODELCO. While the agreement is non-binding, it signifies a strong intent from both parties to work together in areas of strategic importance.

Hindustan Copper Share Performance 

As of April 03 2025, at 9:30 AM, Hindustan Copper share price was trading at ₹227.24, reflecting a surge of 0.30% from its previous closing price. Over the past month, it has surged by 11.72.

Conclusion

The agreement between HCL and CODELCO is a promising development in the global mining sector. It underscores the growing importance of international cooperation in resource management and technological advancement. Through this partnership, both companies aim to enhance their capabilities, strengthen their market positions, and contribute to the sustainable development of the mining industry.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Mudra Loan Uptake Rising Among MSMEs in Bihar, UP, Odisha, N-E Shows SBI Report

Over the past decade, the Pradhan Mantri Mudra Yojana (PMMY) has played a crucial role in providing financial support to small and micro enterprises across India. 

A recent report by the State Bank of India (SBI) highlights how the distribution of MUDRA loans has evolved, particularly in states with historically lower financial inclusion. The findings indicate a positive shift towards a more inclusive credit distribution pattern, benefiting regions that previously had limited access to formal financial services.

Rising Share of MUDRA Loans in Historically Underserved States

The Pradhan Mantri Mudra Yojana (PMMY) has witnessed a significant shift in loan distribution over the past decade, with a growing focus on states that previously had lower financial inclusion. A recent report by the State Bank of India (SBI) highlights that Bihar, Uttar Pradesh, Odisha, and the North-east have seen a notable increase in their share of MUDRA loans.

Bihar’s share of PMMY loans has nearly doubled from 5.67% in FY16 to 10.97% in FY25. Uttar Pradesh has also seen an increase from 9.27% to 11.30%, while Odisha’s share has risen from 4.24% to 4.51%. The North-east, traditionally characterised by lower credit penetration, has also experienced steady growth in loan disbursement. This upward trend signifies the success of targeted policy interventions aimed at financially underserved regions, providing easier access to microcredit for small businesses and entrepreneurs.

Impact of Policy and Digital Lending Expansion

The SBI report attributes this shift to policy-driven initiatives designed to enhance financial accessibility in lagging states. The implementation of digital lending platforms, such as ‘PSB Loans in 59 Minutes’ and ‘UdyamiMitra,’ has played a crucial role in bridging the credit gap. Additionally, the introduction of the Unified Lending Interface (ULI) is expected to further strengthen access to formal credit in these regions.

Despite this progress, Maharashtra, Tamil Nadu, and Karnataka continue to receive a substantial share of MUDRA loans. However, the policy emphasis is increasingly shifting towards states where financial inclusion was previously limited. The report also highlights a growth in the average loan ticket size, from ₹38,000 in FY16 to ₹1.02 lakh in FY25, indicating an expansion in the scale of small businesses supported under PMMY. This transformation reflects a significant impact, highlighted by the PMMY’s sanctioning of over ₹33 lakh crore in loans to micro and small enterprises over the past decade

Conclusion

The evolving distribution of PMMY loans demonstrates a positive move towards addressing regional financial disparities. While significant progress has been made in improving credit accessibility, challenges such as infrastructure constraints, financial awareness, and skill development gaps remain. Nevertheless, the continued policy focus on financial inclusion is expected to contribute to sustained economic growth and the empowerment of small enterprises across the country.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Kotak Mutual Fund Launches Energy Fund, SBI Mutual Fund Files for Arbitrage-Based FoF With SEBI

Two new mutual fund offerings are in focus this month – Kotak Mutual Fund has opened subscriptions for its energy-focused equity scheme, while SBI Mutual Fund has filed draft papers for a fund of fund (FoF) scheme combining debt and arbitrage strategies. 

Kotak Energy Opportunities Fund 

Kotak Mutual Fund has launched the Kotak Energy Opportunities Fund, an open-ended equity scheme focused on India’s energy and allied sectors. The New Fund Offer (NFO) opens on April 3, 2025, and closes on April 17, 2025.

This scheme aims to generate long-term capital appreciation by investing in equity and equity-related instruments of companies operating in sectors such as power, oil and gas, renewables, and ancillary energy services. The fund follows a market-cap-agnostic approach and will be benchmarked against the NIFTY Energy Total Return Index.

Details

  • Fund Type: Open-ended sectoral/thematic equity scheme
  • Minimum Investment: ₹100
  • Exit Load: 1% if units beyond 10% are redeemed within one year
  • Fund Managers: Harsha Upadhyaya, Mandar Pawar, and Abhishek Bisen
  • Benchmark: NIFTY Energy TR Index

The fund is available for fresh subscriptions and switch-ins from existing Kotak Mutual Fund schemes during the NFO window.

SBI Income Plus Arbitrage Active FoF

SBI Mutual Fund has filed draft papers with SEBI for a new open-ended Fund of Fund (FoF) – SBI Income Plus Arbitrage Active FoF. This scheme will invest primarily in units of actively managed debt-oriented and arbitrage mutual fund schemes.

The fund’s objective is to offer a mix of regular income and capital appreciation. It will maintain a portfolio allocation of 50–65% in debt schemes, 35–50% in arbitrage schemes, and up to 5% in money market instruments.

Details

  • Benchmark: 65% Nifty Composite Debt Index + 35% Nifty 50 Arbitrage Index
  • Minimum Investment (NFO): ₹5,000
  • Exit Load: 1% if units beyond 10% are redeemed within one year
  • Fund Manager: Ardhendu Bhattacharya

Units will be offered at ₹10 each during the NFO and will be available for continuous sale and repurchase post-listing.

Conclusion

Kotak’s new fund targets growth in the evolving energy sector, while SBI’s proposed FoF focuses on income generation through debt and arbitrage strategies. Both funds have specific investment objectives, structures, and risk profiles.

Ready to watch your savings grow? Try our SIP Calculator today and unlock the potential of disciplined investing. Perfect for planning your financial future. Start now!

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.

SEBI Fines OPG Securities ₹5.2 Crore in NSE Co-location Matter

The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹5.2 crore on stockbroker OPG Securities and its directors in connection with the National Stock Exchange (NSE) co-location matter. The case relates to unfair access to NSE’s secondary market servers.

Breakdown of Penalty

SEBI issued a ₹5 crore fine on OPG Securities and its three directors – Sanjay Gupta, Sangeeta Gupta, and Om Prakash Gupta, jointly, citing engagement in unfair trade practices. An additional fine of ₹10 lakh each was imposed on OPG Securities and Sanjay Gupta for non-compliance with SEBI’s code of conduct and for obstructing the investigation.

Findings by SEBI

According to SEBI’s 25-page order, OPG Securities gained an unfair advantage by repeatedly connecting to NSE’s Secondary Point of Presence (POP) server. SEBI noted this as a recurrent and serious violation. The adjudicating officer stated that the conduct breached fair access norms and amounted to misuse of the co-location facility.

The directors were held vicariously liable as they were in charge of the company during the period when the violations occurred. SEBI also observed that the company failed to maintain the expected standards of integrity, due diligence, and compliance with statutory requirements.

Appeals and Past Developments

This is not the first penalty order in the matter. In February 2021, SEBI had passed a similar order imposing a ₹5.2 crore penalty. Following that, the matter was appealed to the Securities Appellate Tribunal (SAT), which in July 2023 directed SEBI to reconsider the quantum of penalty.

In September 2024, SEBI dropped charges against the NSE and its former officials due to lack of evidence. Meanwhile, OPG’s disgorgement amount was revised to ₹85 crore. Appeals in the SAT and Supreme Court are still pending.

SEBI’s Stand

SEBI clarified that the current order was limited to reassessing the penalty, not re-evaluating the violations. The request to delay the penalty process was rejected.

Conclusion

Despite pending appeals, SEBI has proceeded with reaffirming the penalty, stating that the violations have already been confirmed and due process has been followed.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Markets Crash, Some Investors Buy—Here’s Why!

‘Dar Ke Aage Jeet Hai’—a phrase often used in life’s toughest moments. But does it hold true in stock markets?

Market downturns often trigger panic, leading many investors to pull back. However, past cycles show that some investors continue to invest even when markets are struggling. When the recovery happens, their approach becomes evident.

A few things stand out:

  • Markets that seem at their worst have often been on the verge of improvement.
  • Investing only after strong past returns means missing the early phases of recovery.
  • Many investors who stay invested through bear markets see the impact when markets turn.

India’s nominal GDP has grown at around 12.5% annually, and broad indices like Nifty 50 have delivered returns in a similar range over time. While short-term fluctuations are unavoidable, some lessons from past market downturns remain relevant.

Lessons from Bear Markets 

  • Equity Returns Are Non-Linear: 

Gains build up over the years but can also decline quickly. Market swings are part of the cycle.

  • Fear and Greed Influence Decisions: 

Short-term reactions often drive market movements, but some investors choose to stick to their strategy.

  • Time Horizons Matter: 

Rigid timelines don’t always align with market cycles. A flexible approach can help manage returns better.

  • Avoid Binary Thinking: 

Markets don’t operate in extremes of only highs or lows. Decisions based on facts and trends help in navigating volatility.

  • Equities and Optimism: 

If downturns create constant stress, it may be worth reconsidering investment choices.

  • Market Timing Is Uncertain: 

Predicting exact highs and lows is difficult. Some investors focus on long-term trends instead.

  • Market Cycles Repeat: 

Phases of extreme highs and lows eventually correct. Observing these cycles can help in making informed choices.

Market movements often resemble a pendulum—swings to extremes and eventually adjust. Each cycle brings different challenges and opportunities, shaping how investors approach the next phase.

 

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

How To Build Over ₹65 Lakh Corpus In 5 Years: Through Diversified Approach

Building a significant investment corpus of ₹65 lakh within a relatively short span of 5 years may appear challenging at first glance. Shorter investment horizons typically involve higher risks and uncertainties. However, by adopting strategic planning, disciplined investing, and a well-diversified portfolio, investors can considerably enhance their prospects of meeting their financial goals.

Importance of Diversified Investments

Diversification is considered a fundamental principle in investing, designed to balance risks and returns. Rather than solely investing in traditional instruments such as fixed deposits (FDs), which offer safety but relatively low yields, spreading investments across different asset classes can help in mitigating risks and maximising returns.

Nevertheless, diversification by itself does not automatically guarantee positive outcomes. Investors need to ensure an appropriate mix and balance to sustain stability, especially during turbulent economic times. For example, a carefully planned combination of gold, debt mutual funds, and equity mutual funds can potentially build a substantial corpus within 5 years.

Step Approach to Achieving a ₹65 Lakh Corpus

To illustrate how one might reach the ₹65 lakh milestone in 5 years, consider dividing your investments equally into three major asset categories: gold, debt mutual funds, and equity mutual funds.

Gold Investment: Stability and Consistent Returns

Historically, gold has been considered a safe-haven asset, particularly during uncertain times or market volatility. For instance, in 2024, gold provided impressive returns of around 26%, driven by heightened global geopolitical tensions. In the year 2025 alone, it has delivered about 14.1% year-to-date returns.

Over the long term, gold’s average annual return between 1995 and 2024 stands at approximately 10%, making it considerably more attractive than traditional FDs.

Gold Investment Calculation:

  • Monthly Investment: ₹25,000
  • Investment Duration: 5 years
  • Total Investment: ₹25,000 × 12 months × 5 years = ₹15,00,000
  • Estimated Corpus: ₹25.08 lakh

Debt Mutual Funds: Balancing Risk and Reward

Debt mutual funds typically carry less risk compared to equity-focused funds, making them suitable for relatively conservative investors. Historical data suggests these funds generally yield annual returns ranging between 10% and 13% over a 5-year period.

Assuming an average annual return of about 12%, investing ₹25,000 monthly in debt mutual funds could build a sizable corpus.

Debt Mutual Fund Investment Calculation:

  • Monthly Investment: ₹25,000
  • Investment Duration: 5 years
  • Total Investment: ₹25,000 × 12 months × 5 years = ₹15,00,000
  • Estimated Corpus: ₹20.62 lakh

Equity Mutual Funds: Higher Risk, Higher Potential Returns

Equity mutual funds invest primarily in stocks and offer potentially high returns over longer periods, albeit with greater volatility. Over the past few years, certain large-cap equity funds have delivered consistent returns averaging around 15% per annum.

If similar performance persists, equity investments could significantly boost the overall corpus.

Equity Mutual Fund Investment Calculation:

  • Monthly Investment: ₹25,000
  • Investment Duration: 5 years
  • Total Investment: ₹25,000 × 12 months × 5 years = ₹15,00,000
  • Estimated Corpus: ₹22.42 lakh

Total Investment and Final Corpus

By combining the investments across these three asset classes, an investor would invest a total amount of ₹45 lakh over 5 years, equating to ₹75,000 per month.

The cumulative estimated corpus at the end of this 5-year investment horizon would be:

  • Gold: ₹25.08 lakh
  • Debt Mutual Funds: ₹20.62 lakh
  • Equity Mutual Funds: ₹22.42 lakh
  • Total Estimated Corpus: ₹68.12 lakh

Conclusion

Adopting disciplined investing habits, staying informed about market developments, and balancing the portfolio periodically are critical practices for successfully building the targeted corpus.

By employing this diversified investment approach, investors can confidently navigate through economic uncertainties, gradually moving towards their financial aspirations.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Government Issues 67 Sovereign Gold Bond Tranches: An Overview Up to FY25

The Indian government has actively utilised Sovereign Gold Bonds (SGBs) as a strategic financial tool. By the financial year 2024-25, a total of 67 tranches had been issued, amounting to a significant volume of gold. This blog explores various aspects of the SGB programme, including its issuance, valuation, redemption policy, and recent changes.

Total Issuance and Outstanding Value

Minister of State for Finance, Pankaj Chaudhary, informed Parliament that as of the financial year 2024-25, the government issued 67 tranches of Sovereign Gold Bonds, equivalent to approximately 146.96 tonnes of gold. The outstanding valuation of these bonds, based on the issue price, was ₹67,322 crore for 130 tonnes of gold, as of March 20, 2025.

Redemption Policy

The redemption process for Sovereign Gold Bonds is tied directly to the prevailing market price of gold at the time of maturity. Investors receive returns based on this price, providing them with potential appreciation aligned with market fluctuations.

Gold Reserve Fund (GRF)

To manage the risks and maintain financial stability associated with Sovereign Gold Bonds, the government established the Gold Reserve Fund (GRF). This fund is maintained within the Public Account and regularly credits the price and interest differential amounts. The GRF helps manage discrepancies arising from fluctuations in gold prices, thereby stabilising the scheme.

Purpose and Benefits of SGBs

Sovereign Gold Bonds were primarily introduced as a tool to finance India’s fiscal deficit, alongside other borrowing instruments. However, they have also gained popularity among investors as an alternative savings instrument to physical gold. The bonds provide investors with a secure, digital mode of holding gold, eliminating concerns related to storage, theft, and purity.

Impact of Recent Economic Conditions

In recent times, global economic headwinds and significant volatility in gold prices have increased the cost associated with issuing SGBs. Highlighting this issue, Pankaj Chaudhary noted, “Therefore, based on maturing and deepening of Indian G-Sec market, which helped in mobilising relatively low-cost borrowing, resources were not raised through SGBs in FY 2024-25.” This indicates a strategic shift by the government towards more cost-effective borrowing alternatives like Government Securities (G-Secs).

Additional Insights: Pradhan Mantri Mudra Yojana

In a separate disclosure, Chaudhary informed that as of February 28, 2025, over 52.07 crore loans have been sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) since its inception. Additionally, the average non-performing assets (NPAs) for the scheme stood at a manageable 2.21% of the amount disbursed, according to data provided by Member Lending Institutions (MLIs) on the Mudra portal.

Conclusion

The Sovereign Gold Bond scheme continues to play an integral role in India’s economic strategy, adapting to market conditions and fiscal priorities. Although issuance paused in FY25 due to economic factors and more favourable borrowing options, SGBs remain a relevant and attractive savings alternative for many Indian investors, reflecting their dual role as a financing and investment instrument.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Power Grid Secures New Transmission Project and Plans 81st NCD Issue

Power Grid Corporation of India Limited (POWERGRID), a Maharatna CPSU and one of India’s leading electric utilities, has announced that its “Committee of Directors for Bonds” will meet on April 4, 2025. The agenda? To consider the issuance of Unsecured, Non-Convertible, Non-Cumulative, Redeemable, Taxable Bonds under private placement. This will be POWERGRID’s 81st (LXXXI) bond issue in the financial year 2025-26.

The company aims to raise capital through these Non-Convertible Debentures (NCDs), which are typically used for funding capital expenditure or refinancing existing liabilities. While the terms, amount, and tenure are yet to be disclosed, the move highlights POWERGRID’s continuous reliance on bond markets as a strategic financing avenue.

Declared Successful Bidder for Inter-State Transmission Project

In another development, POWERGRID has been declared the successful bidder under Tariff Based Competitive Bidding (TBCB) norms for a major inter-state transmission system. The project is titled:

“Transmission System for evacuation of power from Mahan Energen Limited Generating Station in Madhya Pradesh.”

This win comes under the Build, Own, Operate and Transfer (BOOT) model, further solidifying POWERGRID’s dominant role in the transmission infrastructure domain. The Letter of Intent (LoI) for this project was received on April 1, 2025.

Project Highlights

The awarded project will involve the development of a 400kV double-circuit transmission line along with associated bays at the existing Rewa Power Station (PG) sub-station, located in Madhya Pradesh. Once operational, the transmission system is expected to enhance the evacuation capacity from Mahan Energen’s generating units, thereby improving regional grid reliability and supporting power availability in the state.

Share Price Movement 

The share price of Power Grid was seen trading down by 0.60% at ₹287.40 as of 10:58 AM on April 2, 2025.

Conclusion

These 2  announcements—progress on the bond issuance front and securing of a new infrastructure project—reflect POWERGRID’s dual focus on financial discipline and project execution. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Sovereign Gold Bonds: How Rising Gold Prices Have Grown Government Liabilities to ₹1.2 Lakh Crore

The Sovereign Gold Bond (SGB) scheme, introduced in 2015, was a novel attempt by the Indian government to curb gold imports and reduce the country’s current account deficit. Over the years, the scheme attracted a significant number of investors seeking to benefit from gold price appreciation and regular interest income. However, what began as a strategic move to raise low-cost capital has evolved into a substantial financial obligation for the government.

A Trillion-Rupee Gold Dilemma

According to a recent report, if the government were to redeem all outstanding sovereign gold bonds as of April 1, 2025, it would need to shell out a staggering ₹12,06,92,00,00,000 – over ₹1.2 trillion or ₹1.2 lakh crores. This estimate is based on the prevailing gold price of ₹9,284 per gram.

In a written reply to Parliament, the government also noted that the outstanding value of these bonds as of March 20, 2025, based on the issue price, stands at ₹67,322 crores for approximately 130 tonnes of gold. This indicates that the government’s liability has swelled by 79% in absolute terms, excluding interest payments made over the years.

Redemption Trends and Gold Price Impact

SGBs are redeemed based on prevailing gold prices, with the actual redemption value calculated using the average closing price of gold in the preceding week. As gold prices continue to rise, so does the redemption cost.

The first tranche of bonds, for example, had to be redeemed at a 128% premium. Including interest payouts, the overall outflow on this tranche was 148% higher than the amount originally raised. As more tranches mature in the coming years, a similar pattern could emerge, especially if gold prices continue their upward trajectory.

Tranche-Wise Timeline and Redemption Buffer

While the liability appears massive, not all bonds are set to mature at once. The government has already fully redeemed bonds from seven tranches and recently offered early redemption for the eighth tranche. The final tranche is not due for maturity until 2032, providing the government with a much-needed buffer to stagger redemptions over time.

As of March 20, 2025, bonds amounting to less than 17 tonnes of gold have been fully redeemed. This leaves a considerable balance still on the government’s books, with potential liability increasing further if gold prices continue to escalate.

The Scale of Issuance: A 9-Year Snapshot

Since its inception, the SGB scheme has resulted in the issuance of bonds equivalent to 147 tonnes of gold. Each bond is pegged to one gram of gold. In total, the government has raised ₹72,274 crores over 9 financial years through these issuances. The issue price per bond has ranged from ₹2,684 in the first tranche to ₹6,263 in the 67th tranche – closely reflecting the then-prevailing gold prices.

Strategic Shield: RBI’s Gold Hoard

Interestingly, while the scheme may appear to be weighing heavily on the exchequer, the Reserve Bank of India (RBI) has simultaneously built a strategic hedge. According to a report, the RBI has quietly accumulated 321 tonnes of gold since the inception of the scheme. This move has served as a risk offset, shielding the system from the mounting liabilities of SGBs.

The RBI’s gold reserves have led to mark-to-market gains of approximately $20 billion. While these gains belong to the central bank, they are ultimately transferred to the government annually, offering a financial cushion amidst the rising cost of redemptions.

Conclusion

The SGB scheme has provided Indian investors with an efficient, paper-based alternative to physical gold, offering safety and returns tied to market performance. However, it has also created a growing fiscal liability for the government, especially in the context of rising gold prices.

The government’s redemption obligations, coupled with the interest payouts and price-linked bond maturity, underscore the complexities of financial instruments tied to commodity prices. Fortunately, the RBI’s strategic accumulation of gold offers a mitigating factor that could help ease the burden over time.

 

 

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.