Companies continue to hit the corporate bond market, with a whopping Rs 2.86 lakh crore being picked up between April and October 2015 through the private placement route, according to Sebi data. This is a 56.05% y-o-y rise in the quantum of funds raised in the first seven months of this fiscal.
The fact that coupons on bonds are least 110 bps lower than on loans is possibly the primary reason for companies accessing the bond markets. Although banks have reduced their base rates following the 50-bps repo rate cut in September, yields on corporate bonds are comparatively lower. As of now, a AAA-rated public sector unit can issue a 10-year bond at approximately 8.20% while the lowest base rate is 9.30%.
Reserve Bank of India data show non-food credit growth grew 9.79% y-o-y in the fortnight to October 16.
Sebi data show firms raised R43,930.85 crore through the corporate bond market in October, a 14.40% y-o-y rise. In September this year, companies had raised R26,611.51 crore through the private placement route.
Market experts believe that issuances are likely to remain robust this fiscal and may even surpass the Rs4.04-lakh-crore figure achieved in FY15. This could also be supported by the fact that yields have come down after the 50-bps repo rate cut in RBI’s credit policy on September 29.
The highest amount of issuances happened in April this year when companies borrowed R84,806.74 crore through the bond market, Sebi data show.