The corporate bond market seems to have become the most preferred route for raising funds, with firms having borrowed a whopping Rs 2.42 lakh crore between April and September 2015, according to Sebi data.
This is a 67% rise in funds raised through the private placement route in the first six months of this fiscal year compared to the same period last year.
However, September has seen a fall in issuances. Sebi data show that firms raised Rs 26,611.51 crore through the corporate bond market last month, a 54.57% fall compared to the quantum issued in September 2014.
Even on a month-on-month basis, issuances have seen a fall with companies having raised Rs 46,564.45 crore through the private placement route in August.
The highest amount of issuances happened in April this year when companies borrowed Rs 84,806.74 crore through the bond market, according to Sebi data.
Market experts believe that issuances are likely to remain robust this fiscal and may even surpass the Rs 4.04 lakh crore figure achieved in FY15. This could also be supported by the fact that yields have come down after the 50-basis-point repo rate cut by the RBI on September 29.
On Tuesday, Rural Electrification Corporation (REC) issued ten-year bonds at 8.11%, reflecting a 29-basis-points fall in yields on long-tenure bonds since mid-September. Although banks also reduced their base rates following the repo rate cut in September, yields on corporate bonds are still comparatively lower.
The lowest bank base rate in the system currently stands at 9.30%, which is 119 basis points higher than the long-term corporate bond yields. This difference of at least 100-120 basis points could be considered as the primary reason that led to a major shift of borrowing to the bond market from the banking system.
From April to mid-September, non-food credit has shrunk by Rs 1.58 lakh crore whereas companies have borrowed Rs 2.42 lakh crore from the bond market.