listed Indian companies raised a staggering Rs 6.22 lakh crore through private placement of corporate bonds in 2017, an increase of nearly 5 per cent from the preceding year.
The funds have been raised mainly for expansion of business plans, repayment of loans and to support working capital requirements.
According to the latest data with markets regulator Sebi, firms have collectively garnered Rs 6.22 lakh crore through private placement of corporate bonds last year, higher than Rs 5.95 lakh crore raised in 2016.
Demonetisation led to a fall in interest rates (cost of borrowing) and ensured adequate liquidity in Indian capital markets, Bajaj Capital Senior VP and Head Investment Analytics Alok Agarwala said.
The lower cost of borrowing and strong demand for corporate paper (from investors chasing yields) made it attractive for Indian companies to raise debt, he said.
“Moreover, with private capex remaining lackluster, companies raised capital mostly for short term working capital purposes and to replace existing high cost debt. Debt and not equity is the preferred route for such purposes,” he added.
According to Anshul Saigal, portfolio manager at Kotak Mutual Fund, companies prefer debt route for raising money instead of equity, which is an expensive mode of capital raising.
However, the number of issues during the period under review fell to Rs 2,658 from 3,366 in 2016.
In debt private placements, firms issue securities or bonds to institutional investors to raise capital.