Debt placement fundraising falls to ₹32,405cr in April-May

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In the first two months of the current fiscal year, fundraising by listed companies through private placement of corporate bonds fell by 39% to 32,405 crores.

Additionally, the outlook for the remainder of the year is uncertain on the expectation of further interest rate hikes.

In comparison, in April-May 2021-22, 53,253 crore was raised through the route, according to data from the Securities and Exchange Board of India (Sebi).

Notably, due to strong equity performance and aggressive disbursement of funds by banks at lower interest rates, vehicular fundraising plunged to a six-year low in 2021-22 for 5.88 lakh crore.

“Sandeep Bagla, CEO of Trust MF, said the outlook for the rest of the financial year is quite uncertain as interest rates are expected to firm further, liquidity to tighten and inflation to remain elevated. environment, aggregate demand is expected to remain subdued, thus also suppressing demand for credit, he added.

According to Divam Sharma, co-founder of Green Portfolio, several factors will dictate fundraising activities across the mode, such as the interest rate cycle, the sentiment boost in the CAPEX cycle and the currency depreciation cycle.

Fundraising by companies listed on the BSE and the NSE was moderate to 32,405 crore in April-May of the current financial year 2022-23. This was 39% less than a year ago.

Listed companies raised the weakest funds through bonds and the drawdown of credit from banks was slow.

“Sonam Srivastava, Founder of Wright Research, Sebi Reg Investment Advisor, said that with global central banks raising rates to curb inflation, interest rates have risen and as a result investors on the capital markets expect a higher rate of return. This invariably means that the cost of borrowing for listed companies through corporate bonds has increased and is no longer as lucrative as it used to be, a- she added.

Green Portfolio’s Sharma said rising bond yields due to high inflation and the resulting rising interest rate expectations caused bond prices to correct.

In the first two months of the current fiscal year, 10-year bond yields in the United States had reached 3.3%, which, combined with expectations of currency depreciation, had deterred institutional investors from investing. invest in these bonds for the long term.

Regarding the show, 137 issues were reported during the reporting period, compared to 192 issues in April-May 2021-22.

In the near term, rate hikes will be executed by central banks, which would hamper corporate bond market volume.

Corporate bonds are the most flexible way to raise funds for listed companies that use funds raised from corporate bonds to expand their product/service offerings, establish new manufacturing facilities, purchase plants and machinery and spend on CAPEX.

For a company to raise funds, it prefers to go the corporate bond route as it offers existing sponsors and shareholders non-dilution of equity.

Debt markets are mainly exploited by companies in the financial sector which use funds for subsequent loans and strengthen capital buffers.

In addition to refinancing existing debt, the non-financial group deploys the funds primarily for general business expenses, capital expenditures and inorganic growth opportunities.

A total of 1,682 crores came from the public issuance of corporate debt during the reporting period, excluding capital raised through the private placement of corporate debt.

High to steady liquidity in the system and an overall decline in credit drawdowns would keep reliance on public corporate debt issuance low, experts say.

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