Corporate bond issuances via private placement during the eleven months of 2015-16 have exceeded the overall issuance figure in FY15, data from the Securities and Exchange Board of India (Sebi) show.
Firms borrowed Rs 4.14 lakh crore during April 2015 and February 2016, which is 2.6% higher than the entire amount of Rs 4.04 lakh crore raised in the entire FY15.
Latest Sebi data indicates that companies borrowed Rs 33,810.37 crore in February this year, a fall of 19.21% on a year-on-year basis. The overall rise in the corporate bond issuances this fiscal was contributed by issuances in the first two months of the fiscal when firms raised more than Rs 1 lakh crore via the private placement route.
At the same time, bank lending has started to witness some kind of a pick-up. Latest data from the Reserve Bank of India (RBI) shows that non-food credit for the fortnight ended February 19 grew 11.68% over the year-ago period.
The outstanding non-food credit currently stands at Rs 70.64 lakh crore — having shown a growth of Rs 20,229 crore from a fortnight back. Non-food credit disbursements for the fiscal year stands at Rs 3.03 lakh crore.
Deposits in the banking system stands at Rs 93.51 lakh crore for the fortnight-ended February 19, up 11.02% over the same period last year.
Non-food credit has started to pick up from December 2015 when the fortnightly growth was a two-digit one after a reasonable gap. However, corporate bond issuances have been slowing down over the last four months compared to the same period a year ago.
With the RBI reducing the repo rate by 125 basis points in the calendar year 2015, bond yields softened considerably last year, prompting firms to turn to debt market borrowing. However, multiple selloffs in the global bond market in 2015, followed by oversupply of high-yielding state government securities, put the yields under pressure.
Corporate bond yields are almost at the same levels seen over a year back whereas banks have cut their base rates by 60-70 basis points over the last year or so. Despite this, there is still a reasonable gap of at least 75 basis points between bond yields and lending rates of banks. The lowest base rate in the banking system currently stands at 9.30%, while a AAA-rated PSU can borrow at levels close to 8.55-8.60%.