Fund raising via debt hits 6-year low at ₹5.88L cr

NEW DELHI: Fund raising by listed companies through private placement of corporate bonds plunged to a six-year low in 2021-22 to ₹5.88 lakh crore because of good performance of the equities and aggressive fund disbursal by banks at low interest rates.

This was 24% lower that the record ₹7.72 lakh crore mobilised in 2020-21, data with the Securities and Exchange Board of India (Sebi) showed. Unless the high government borrowings and adverse interest rate cycle play spoilsport, the ongoing financial year is expected to be robust in terms of fund raising activities through the debt route because of higher demand for credit from corporates in light of the improving economic outlook, experts said.

“During FY23, there should be some increase in raising of debt through bonds as corporate India presses the pedal on the next major phase of the capital expenditure cycle. Also, these bond issuances should evince good interest from risk seeking investors,” said Ricky Kirpalani, lead sponsor, First Water Capital Fund (AIF).

Issuance volumes in the private debt market are improving because of higher demand for credit from issuers in light of the improving economic outlook, said Vibhor Mittal, chief business officer, CredAvenue.

However, dampeners could be high government borrowings that may crowd out private placements and adverse interest rate cycles.

The fund raising through the private placement of corporate bonds at ₹5.88 lakh crore in FY22 was the lowest since 2015-16, when listed companies had raised ₹4.58 lakh crore, the data showed.

The non-financial bunch deploys funds mainly for general corporate expenses, capital expenditure and for inorganic growth opportunities, apart from refinancing existing debt.

The low fund raising through private placement in FY22 compared to the preceding fiscal could be attributed to good performance of the equities in the stock market last year, said Kamlesh Shah, managing director, Share India Securities.

Low interest rates and measures by the Reserve Bank of India, boosting liquidity, helped the cause despite the pandemic, Shah said.