Indian firms to double fundraising via public bond sales in H2 FY22: Report

Indian corporates are likely to raise double the amount of funds through the public issue of bonds in the second half of this fiscal than they did in the first, as tighter systemic liquidity and lower fixed deposit rates make these instruments attractive, analysts said.

"There is a vast pipeline of companies waiting to tap the public issue route and we may see them raising around 60 billion Indian rupees ($724.5 million) over the next four to five months," said Ajay Manglunia, managing director and head of Investment Grade Group at JM Financial.

Indian companies raised around Rs 33 billion between April and September, which merchant bankers expect will more than double in October-March to take the overall issuances above Rs 100 billion for the fiscal.

"With the tightening systemic liquidity situation, some companies are not able to get larger quantum through private placement, but get easy funding through the public issue route," Manglunia said.

Adani Enterprises Ltd is set to make its first-ever public bond offering, aiming to raise Rs 10 billion, while other non-banking finance companies like L&T Finance Holdings Ltd and Indiabulls Housing Finance Ltd are also expected to come up with bond issuances over the next two months.

The recent success of National Highways Infra Trust's (NHIT) issue, despite its longer tenor and relatively complex structure, has bolstered expectations of similar demand from retail investors.

NHIT received bids worth around 49 billion rupees on the opening day, more than triple its aim of raising Rs 15 billion rupees.

"Smaller lot sizes also make these instruments attractive as that helps to provide decent liquidity," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.

Moreover, fixed deposit rates have not risen as sharply as bond yields, making them less appealing to retail investors, say market participants.

"In spite of 190 basis points of rate hike by the central bank, banks are yet to substantially increase their fixed deposit rates to attract investors. Hence these debt offerings are lucrative to investors," said Srinivasan.

The AAA-rated NHIT's bonds, for example, will offer a yield of 8.05% to investors, while State Bank of India offers a maximum of 5.85% on its deposits.

($1 = 82.8220 Indian rupees)

(Reporting by Dharamraj Lalit Dhutia; Editing by Savio D'Souza)