Large cos may have to tap bond market for fund raising

Markets watchdog Securities and Exchange Board (Sebi) will soon come out with a consultation paper on making it mandatory for large corporates to meet onefourth of their financing needs from bond markets.

The move follows the Budget 2018 proposal in this regard, and is aimed at partfunding the huge investments needed in the infrastructure space which is projected at $4 trillion over the next decade, Sebi chairman Ajay Tyagi said.

The move assumes importance as the banking sector is in deep morass following a massive spike in bad loans which is hovering around 12 per cent of the system now. This has made banks, especially the state-run lenders, wary of lending to low-rated corporates, and the resultant spike in the demand for good quality debt papers from corporates.

"The bond market has a huge potential to grow, which will need a robust secondary market. We will soon come out with a consultation paper on making it mandatory for large companies to source a quarter of their financing needs from the bond market. Final guidelines will be drafter in consultation with all the stakeholders," said Tyagi.

He said this will go a long way in developing a robust secondary market for the debt segment.

It can be noted that the corporate bond market is valued at around $290 billion, which is only around 17 per cent of GDP, way lower than equity market at 80 per cent.

"Given the relatively nascent stage of development of the bond market, such a framework has to be relatively a soft-touch approach, and will be finalised in consultation with stakeholders soon," Tyagi said while addressing a conference on corporate bond market organised by Assocham.