Funds raised via corporate bonds at record high

Data from Sebi show companies raised Rs 2.43 lakh cr in April-Sept

With lending rates of banks higher than those at which funds are available for companies, private placement of corporate bonds were at a record high in April-September (first six months of this financial year). The bank credit data on a fortnightly basis shows a rise below 10 per cent.

Data from the Securities and Exchange Board of India show companies raised Rs 2.43 lakh crore in April-September, the highest since 2007. Year-on-year, the growth was 67.1 per cent, from Rs 1.45 lakh crore.

“Corporates were finding it more economical to raise funds via corporate bonds than bank credit. Besides, bank financing takes a longer time. The corporate bond market also developed due to foreign institutional investors’ buying of bonds, since government securities’ limits (the amount they are allowed to buy) got filled,” said  Ajay Manglunia, senior vice-president (fixed income), Edelweiss Securities.

According to issue arrangers, some of the recent ones include bonds of Can Fine Homes of a 39-month tenure at 8.41 per cent and Reliance Jio’s 10-year bonds at 8.27 per cent.

Reserve Bank of India (RBI) data shows banks’ credit grew 9.5 per cent to Rs 67.83 lakh crore in the fortnight ended October 16, against Rs 61.92 lakh crore a year before. For the week ended October 16, the base rate (BR) or the minimum rate at which banks lent was 9.3-9.7 per cent.

“This trend will continue, where corporates might continue to borrow more through the bond market. Currently, an ‘AAA’ rated public sector undertaking could raise 10-year bonds at around 8.15 per cent,” said Arvind Konar, head of fixed income, Almondz Global Securities.

Since this financial year began, RBI has cut the rate at which banks borrow from it by 75 basis points. The BR of banks have fallen by 55-70 bps since April 1.

Beside corporate bonds, companies have also borrowed through issuance of commercial paper. Here, too, rates had dropped sharply, compared with the lending rates of banks.