Retail investors lapping up debenture issues
Mumbai, Aug. 26: The mayhem in equities market and falling deposit rates have retail investors lapping up corporate debt like never before, if the overwhelming response to the recent/ongoing NCD issues from NBFCs, which are facing one of the worst liquidity crisis ever, is any indication.
This shows that retail investors' confidence in NBFCs have not been deterred by the risks facing the sector following defaults by IL&FS, DHFL and Reliance Home Finance, show the subscription data. For instance, the just concluded Rs 500 crore NCD issue from Tata Capital had Rs 175 crore reserved for the retail but got 450 per cent oversubscription at Rs 787 crore, while IIFL's Rs 100 crore issue with Rs 40 crore for retail got an oversubscription worth Rs 163 crore or 408 per cent as per the BSE data.
Similarly, JM Financial's ongoing Rs 100 crore issue has Rs 40 crore reserved for the retail but has seen a full 185 per cent or Rs 78 crore oversubscription, while Shriram Transport got 278 per cent, and Indiabulls Rs 333 crore for Rs 133 crore reserved for the retail.
More significantly, for Muthoot Finance's recent Rs 100 crore issue of which 50 per cent was reserved for retail had got a whopping 1,077 per cent demand or worth Rs 538 crore.
In some other previous issues between April and July, issues by Srei Infra, ECL Finance, Muthoot Homefin, Magma Fincorp, the oversubscription ranged from 160 per cent to 322 per cent according to the BSE data.
This is significant as the issues closed between April and early August, the average retail subscription was only 61 per cent, according to the exchange data and comes at a time the NBFCs are shooed away by banks. According to BKR Sriram, the distribution head at Geojit Financial Services, the falling equity markets is taking conservative investors to fixed income space, hence the higher demand from retail
Falling equity market is taking conservative investors to the fixed income space, hence the higher demand from investors
investors.
"In NCDs closed mid-August, average individual participation on the total subscription was around 82.4 per cent and retail is around 61 percent," Sriram told PTI.
Between January and July, there were 17 issues with issue size of Rs 19,000 crore against eight issues worth Rs 21,200 crore a year ago. Of the 17 issues in 2019, nine NCDs saw oversubscription in the retail category against four in non-retail category, he said.
Typically an NCD issuer reserves 60-80 per cent for individual investors (retail & non-retail put together and going by the BSE data for 2019, the retail share on subscription level is around 83 per cent on average and going over 90 per cent.
"There is a healthy appetite for corporate debt from retail investors as such investments help diversify portfolio. Also, NCDs offer competitive rates compared to other fixed rate products with higher than bank FD, and yields while risk is AAA," Rajiv Sabharwal, Managing Director at Tata Capital said.