Private placements continue to dominate corporate bond issuance: FSDC Report

Private placements are usually offered to a select few investors like qualified institutional buyers, high net worth individuals or through bilateral negotiation over telephone

The RBI’s FSR said private placements of corporate bonds continue to dominate as the preferred issuance route.

Private placements are usually offered to a select few investors like qualified institutional buyers, high net worth individuals or via bilateral negotiation.

Any placement above Rs 500 crore has to be notified on an electronic book with the stock exchanges, as mandated by Sebi. Such electronic book mechanism improves efficiency, transparency in price discovery and a reduction in cost and time taken for such insurances, the report said. Reserve Bank of India released report prepared for Financial Stability and Development Council.

However, issuers still prefer private placements, controlled by a few big brokerages as that route still has a lot less hassle than raising money through a public issuance, say bond dealers. 

 

For example, any public issuance has to be advertised and a offer document has to be filed with the exchanges, which is not only time consuming, it requires the companies to give lot of granular data, which may not be possible for a company that is in a hurry to raise funds and regularly does so throughout the year.