Private placements up 60% in FY15, says Prime Database study

A total of 344 institutions raised capital through the private placement route in the fiscal under study

Companies are increasingly using the private placement route to meet their capital requirements. The amount of money raised through this route is up as much as 60% over the last year, to Rs.4.32 lakh crore for the recently concluded financial year (FY15).

According to a statement from Prime Database, which compiled the statistics, financial institutions' higher fund-raising led to the surge. This is the highest since at least 2001-02, according to the statement.

Private placement is a process by which companies place their bonds with a limited, select group of investors. They pay interest on the bonds and use the capital to meet their funding requirements. It is different from a regular issue, in the sense that the offer is not open to the public at large (and hence the name private placement).

Sanjeev Khandelwal, Executive Director of PRIME said in the emailed statement that 'on an industry-wise basis, the Financial Services sector continued to dominate the market, collectively raising Rs.3,19,768 crore or 74 per cent of the total amount. Power sector ranked second with an 8 per cent share (Rs. 35,312 crore)'. The highest was through the Power Finance Corporation, the Rural Electrification Corporation, HDFC and LIC Housing Finance. They raised between Rs.24000 crore to Rs.50000 crore.

A total of 344 institutions raised capital through the private placement route. Prime considered placements of bonds which have a tenor of at least a year.

Private sector companies recorded higher growth in mobilization. They raised Rs.1,60,319 crore; an 82 per cent rise over last year's figure of Rs. 88,124 crore. State Level Undertakings' capital raising was up 64 per cent to Rs. 6,057 crore. Public Sector Undertakings raised Rs.31219 crore, roughly the same as last year.

State Financial Institutions raised Rs.883 crore, compared to Rs.1482 crore last year.

The previous high for capital raising through this route was in FY13.Companies had raised Rs.3.52 lakh crore through the route then.

The capital raising through this route has multiplied nearly ten times since 2001-02. Institutions had used the route to raise Rs. 45,427 crore in FY02. The amount of capital raised has risen every year, except in FY14. It fell from Rs.3.52 lakh crore in FY13 to Rs.2.7 lakh crore in FY14.

ICICI Bank recently said that it would raise Rs.50,000 crore through the private placement route. It had earlier borrowed Rs.6850 crore through non-convertible debentures (NCDs) earlier. It will seek shareholder nod for the move in its annual general meeting on June 29.