Private placements hit a high, jump 60% in FY15

'Amount of money raised through this route jumped 60% in FY15'

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 per cent over the past year at Rs 4.32 lakh crore for FY15.

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

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 the offer is not open to the public at large (and hence the name private placement).

Sanjeev Khandelwal, executive director, Prime said in an emailed statement: “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 eight per cent share (Rs 35,312 crore).”

Among the highest fundraisers are Power Finance Corporation, Rural Electrification Corporation, HDFC and LIC Housing Finance, which raised between Rs 24,000 crore and Rs 50,000 crore.

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

Private sector companies recorded higher growth in mobilisation. They raised Rs 1,60,319 crore; an 82 per cent rise over the 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 31,219 crore, roughly the same as last year.

State financial institutions raised Rs 883 crore, compared to Rs 1,482 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.

Capital-raising through this route has multiplied nearly 10 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 it would raise Rs 50,000 crore through the private placement route. It had earlier borrowed Rs 6,850 crore through non-convertible debentures earlier. It will seek shareholders’ nod for the move in its annual general meeting on June 29.