Fundraising via bonds on private placement basis climbs 14% to Rs 7.72 lakh cr in FY 21

New Delhi: Listed companies mopped up Rs 7.72 lakh crore by means of issuance of bonds on private placement basis in 2020-21, a rise of 14 per cent from the previous fiscal, supported by low interest rate and surplus liquidity in the system. This additionally marks the very best stage of fund elevating by means of such a route in a financial year.

Going ahead, sustainability of progress pattern primarily relies upon upon trajectory of value of funds and incremental liquidity in the system, Binod Modi, head – technique at Reliance Securities mentioned.

According to information out there with markets regulator Sebi, firms listed on BSE and NSE garnered a complete of Rs 7.72 lakh crore by means of issuance of bonds in the simply concluded monetary yr, a lot larger than Rs 6.75 lakh crore raised in 2019-20.

In 2018-19, listed entities raised Rs 6.1 lakh crore, Rs 5.99 lakh crore in 2017-18 and Rs 6.4 lakh crore in 2016-17.

However, debt raised by means of such a route stood as little as Rs 1.18 lakh crore in 2007-08. Data prior to this was not out there with Sebi.

The funds have been mopped up to strengthen steadiness sheets, retire current debt and to help working capital necessities.

Harsh Jain Co-founder and COO Groww mentioned that one motive behind firms selecting this route is that the curiosity value on bond issuance is comparatively low.

In addition, banks and NBFCs have additionally been hesitant to problem massive loans to corporates on account of rising NPAs (non-performing belongings), he added.

“Considering low interest rates, and high appetite from institutional investors and capital expansion plans of many companies, there is an additional interest in raising money from issuance of private placement of bonds,” Divam Sharma, co-founder of Green Portfolio, mentioned.

Reliance Securities’ Modi mentioned {that a} persistent low rate of interest cycle and surplus liquidity in the system aided progress in bond issuance by means of private placements.

Additionally, the introduction of a particular liquidity window by the RBI for choose sectors in the course of the yr additionally supported progress, he added.

According to Kaushlendra Singh Sengar, founding father of Invest19 Technologies, firms raised funds via private placement due to its structural benefit to meet the wants of entrepreneurs and buyers. It is a price and time-effective technique of elevating funds.

Above all, it doesn’t require detailed compliance of formalities as required with a public problem, he added.

In phrases of numbers, 1,995 issuances occurred in the interval beneath overview, as in contrast to 1,787 in 2019-20.

In private placements, companies problem securities or bonds to institutional buyers.

Green Portfolio’s Sharma mentioned that many banks have raised cash by means of private placement of Basel-III compliant bonds as there’s an rising urge for food from some home monetary establishments together with LIC to take part in such choices.

Invest19 Technologies’ Sengar believes that fund elevating by means of the route is almost definitely to see a surge in private placements of bonds in the continued fiscal because the economic system is affected by the COVID-19 disaster.

As the nation is battling the resurging of COVID circumstances, so going ahead, the central financial institution could cut back the rate of interest to preserve ample liquidity in the economic system. With the low rates of interest and regulatory benefit, the businesses can garner extra funds on a private placement basis, he added.

The pattern of upper fund elevating by means of debt raised on the private placement basis ought to proceed in FY22 contemplating excessive liquidity, excessive urge for food of institutional buyers and upcoming capex plans from many corporates, Sharma mentioned.

However, Reliance Securities’ Modi is of the view that value of funds is unlikely to stay as little as witnessed in the final two years and subsequently any noticeable progress in fund elevating by means of debt private placement doesn’t look to be on the playing cards in FY22.