Fund raising by listed companies through private placement of corporate bonds plunged to a six-year low in 2021-22 to Rs 5.88 lakh crore owing to good performance of the equities and aggressive fund disbursal by banks at lower interest rate.
This was 24 percent lower from a record Rs 7.72 lakh crore mobilized in 2020-21, data with Securities and Exchange Board of India (Sebi) showed.
Unless the high government borrowings and adverse interest rate cycle play spoilsport, the ongoing financial year is expected to be robust in terms of fundraising activities through the debt route on account of higher demand for credit from corporates in light of the improving economic outlook, experts said.
During FY23, there should be some increase in raising of debt through bonds as corporate India presses the pedal on the next major phase of the capex cycle. Also, with a potentially rising interest rate scenario, these bond issuances should evince good interest from risk seeking investors, Ricky Kirpalani, Lead Sponsor, First Water Capital Fund (AIF) said.
Vibhor Mittal, Chief Business Officer, Cred Avenue, believes issuance volumes in the private debt market are improving on account of higher demand for credit from issuers in light of the improving economic outlook.
However, dampeners to the cause could be high government borrowings that may crowd out private placements and adverse interest rate cycles. In FY22, fund raising through the private placement of corporate bonds was subdued at Rs 5.88 lakh crore.
This was the lowest level since 2015-16, when listed companies had raised Rs 4.58 lakh crore, the data showed.
In terms of issuance, 1,405 issues were witnessed in the just concluded fiscal year as compared to 1,995 issues in 2020-21. The debt markets are mostly tapped by the financial sector companies who use funds for onward lending (as the economic cycle gathers pace) and boost capital buffers. The non-financial bunch deploys the funds mainly for general corporate expenses, capital expenditure and for inorganic growth opportunities apart from refinancing existing debt.
The lower fund raising through private placement route in FY22 compared to the preceding fiscal could be attributed to good performance of the equities in the stock market last year, Kamlesh Shah – MD Share India Securities, said.