Fundraising by listed companies through private placements of corporate bonds fell to a six-year low in 2021-22 at Rs 5.88 lakh crore due to strong equity performance and disbursement aggressive funds from the banks at a lower interest rate.
This was 24% below the record Rs 7.72 lakh crore mobilized in 2020-21, according to data from the Securities and Exchange Board of India (SEBI).
Unless high government borrowing and the unfavorable interest rate cycle play spoilsport, the current fiscal year should be robust in terms of debt fundraising activity due to the increased demand for business credit in light of improving economic outlook, experts say. mentioned.
“In 2022-23, there should be some increase in debt through bonds as Indian companies step on the pedal for the next major phase of the investment cycle. With potentially rising interest, these bond issues should show good interest from risk-seeking investors,” said Ricky Kirpalani, Lead Sponsor of First Water Capital Fund (AIF).
Vibhor Mittal, chief commercial officer of CredAvenue, believes that issuance volumes in the private debt market are improving due to increased demand for credit from issuers in light of the improving economic outlook.
However, the dampeners to the cause could be high government borrowing which can crowd out private placements and unfavorable interest rate cycles. In 2021-22, fundraising through private placement of corporate bonds was moderate at Rs 5.88 lakh crore.
It was the lowest level since 2015-2016, when listed companies raised Rs 4.58 lakh crore, the data showed.
In terms of emissions, 1,405 emissions were recorded during the financial year just ended, compared to 1,995 emissions in 2020-2021. Debt markets are primarily operated by companies in the financial sector which use funds to lend (as the economic cycle accelerates) and build up capital buffers.
The non-financial group deploys the funds primarily for general business expenses, capital expenditures, and for inorganic growth opportunities outside of refinancing existing debt.
The decline in private placement fundraising in 2021-22 compared to the prior year could be attributed to the strong performance of equities in the stock market last year, said Kamlesh Shah, Managing Director of Share India Securities.