Private companies' fund raising via corporate bonds hits 6-year low in 2021-22

New Delhi: Fund raising by listed companies through private placement of corporate bonds plunged to a six-year low in 2021-22 to ₹ 5.88 lakh crore owing to good performance of the equities and aggressive fund disbursal by banks at lower interest rate.

This was 24 per cent lower from a record ₹ 7.72 lakh crore mobilised in 2020-21, data with Securities and Exchange Board of India (SEBI) showed.

Unless the high government borrowings and adverse interest rate cycle play spoilsport, the ongoing financial year is expected to be robust in terms of fund raising activities through the debt route on account of higher demand for credit from corporates in light of the improving economic outlook, experts said.

"During 2022-23, there should be some increase in raising of debt through bonds as corporate India presses the pedal on the next major phase of the capex cycle. Also, with a potentially rising interest rate scenario, these bond issuances should evince good interest from risk seeking investors," Ricky Kirpalani, Lead Sponsor, First Water Capital Fund (AIF) said.

Vibhor Mittal, Chief Business Officer, CredAvenue, believes issuance volumes in the private debt market are improving on account of higher demand for credit from issuers in light of the improving economic outlook.

However, dampeners to the cause could be high government borrowings that may crowd out private placements and adverse interest rate cycles. In 2021-22, fund raising through the private placement of corporate bonds was subdued at ₹ 5.88 lakh crore.

This was the lowest level since 2015-16, when listed companies had raised ₹ 4.58 lakh crore, the data showed.

In terms of issuance, 1,405 issues were witnessed in the just concluded fiscal year as compared to 1,995 issues in 2020-21. The debt markets are mostly tapped by the financial sector companies who use funds for onward lending (as the economic cycle gathers pace) and boost capital buffers.

The non-financial bunch deploys the funds mainly for general corporate expenses, capital expenditure and for inorganic growth opportunities apart from refinancing existing debt.

The lower fund raising through private placement route in 2021-22 compared to the preceding fiscal could be attributed to good performance of the equities in the stock market last year, Kamlesh Shah, Managing Director of Share India Securities, said.