Indian companies raised a record Rs 6.41 lakh crore last fiscal through private placement of corporate bonds to meet business needs, a surge of 40 per cent from the preceding year. These funds have been raised mainly for expansion of business plans, repayment of debt and to support working capital requirements.
In debt private placements, firms issue securities or bonds to institutional investors to raise capital. According to latest data available with markets regulator Sebi, firms garnered a total of Rs 6,40,715 crore in 2016-17, higher than Rs 4,58,073 crore raked in the preceding fiscal.
This was the highest ever fund raising by companies in a financial year since 2001-02, when the firms had raked in Rs 45,427 crore. In terms of numbers, 3,377 issues were made in last financial year compared to 2,975 in 2015-16.
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Bajaj Capital Senior VP and Head Investment Analytics, Alok Agarwala attributed the high inflow in the current fiscal to volatile and weak sentiments in equity markets.
“Volatile and weak sentiments in equity markets encouraged companies to raise capital through private and public bond issues instead of equity issues. Also, cost of raising debt was lower in 2016-17 as interest rates fell.
“At the same time, there were various regulatory initiatives for deepening Indian bond markets such as banks being allowed to issue Additional Tier 1 Bonds, to meet their capital requirement, investment limit for foreign portfolio investors being increased and the withholding tax rate being reduced from 20 per cent to 5 per cent,” he said.