Fund raising via bonds on private placement basis climbs 28% to Rs 4.42 lakh crore in April-October

Companies garnered Rs 4.42 lakh crore through issuance of bonds on private placement basis in the first seven months of the ongoing fiscal, a surge of 28 per cent from the year-ago period, due to low-interest rates.

The funds were mopped up to strengthen balance sheets, retire existing debt and support working capital requirements, market experts said.

According to data available with markets regulator Sebi, companies listed on BSE and NSE garnered total Rs 4.42 lakh crore during April-October 2020-21.

In comparison, listed firms raised Rs 3.45 lakh crore in the first seven months of 2019-20.

The appetite of institutional investors towards investing in bonds of listed companies via private placement issuances has increased in this fiscal year, especially in the last five months.

"Government schemes including production linked interest scheme in promoting companies to raise capital through private placement for bonds is a preferred method as the interest rates are low," said Divam Sharma, co-founder of Green Portfolio.

"The low-interest cost through bond issuances, the reluctance of banks and NBFCs to issue high ticket loans to listed companies are inducing them to raise capital through a private placement of bonds," he added.

In addition, there is an increasing appetite from investors and mutual funds to participate in such issuances as the fund inflows in debt mutual funds have risen. More capital is chasing additional returns, as the interests on other fixed income securities have fallen, Sharma noted.

According to him, many companies in sectors including pharma, chemicals, automobile, electronics and textile are seeking to enhance their capacities as they are seeing an uptick in results in the previous quarter.

In terms of numbers, 1,157 issuances took place in the period under review as compared to 1,069 in the year-ago period.

In private placements, firms issue securities or bonds to institutional investors.

Overall, listed companies raised Rs 6.75 lakh crore through issuance of bonds on private placement basis in 2019-20.

Going ahead, Sharma said the outlook of raising capital through this route looks robust as the interest rates remain low, companies increasingly launch CAPEX plans, and there is a huge appetite from institutional capital to participate in such private placements.