Private placement of debt is seeing an increased activity as finance companies and corporates are hitting the market following a period of lull in April.
According to Prime Database, private placement of debt as of June 15 stood at R7,269 crore. On a month-on-month basis, debt placements rose 40.46% to R9,967 crore.
IOT Utkal Energy, Reliance Jio Infocomm and Export-Import Bank of India were the top issuers of debt and raised R3,000 crore, R2,500 crore and R2,468 crore, respectively, in May. In April, debt private placements dried up to R7,091 crore, a fall of nearly 70% year-on-year, but market players expect action to pick up in July and also hope non-convertible debenture (NCD) issuances from companies of R15,000 crore in July. ?Private placements should pick up. There were some hurdles in the first quarter with the changes in the Companies? Act and getting shareholder nod,? said Ajay Manglunia, senior vice-president and head of fixed income at Edelweiss Securities.
Analysts expect AAA and AA rated companies to be able to access the market at 9-9.25% compared with the rates of 10.25%-10% a year ago and a majority of the companies opt for bonds with 3-5 year tenures. Manglunia also cited the example of Rural Electrification Corporation (REC) which raised R1,700 crore last week at 9.02% with a tenure of five years. Manglunia also expects that banks will be looking to raise tier-2 bonds through the private placement route in addition to the public sector companies, housing finance companies and non-banking finance companies (NBFCs).
Housing and Development Finance Corporation (HDFC) said it is looking to raise R75,000 crore via private placement of NCDs.
The year 2013-14 witnessed a mobilisation through corporate bonds on private placement basis of R2,70,946 crore, a fall of 23% y-o-y. This was mobilised by 245 institutions and corporates, Prime Database said. The highest mobilisation through debt private placements in the period was by PFC (R24,698 crore) followed by HDFC (R24,269 crore), REC (R24,253 crore), LIC Housing Finance (R20,850 crore) and Exim Bank (R10,461 crore).