Non-convertible debentures (NCDs) seem to be emerging as the preferred fund-raising option for companies as they have lined up plans to raise Rs 1,350 crore through this route.

NCDs (non-convertible debentures) are loan-linked bonds issued by a company that cannot be converted into stock and usually offer higher interest rate than that of convertible debentures.

Since January, four companies — ECL Finance, Muthoottu Mini Financiers, Kosamattam Finance and Sakthi Finance — have filed draft papers with market regulator SEBI to collectively raise up to Rs 1,350 crore through the NCD route.

Most of the funds raised through the issue would be used to support working capital requirements and for other general corporate purposes.

Investors’ confidence returned to the equity markets after the formation of a stable government at the Centre, but market experts say many companies prefer the NCD route to garner fresh capital rather than opt for initial public offers (IPOs) and follow-on public offers (FPOs).

Further, many companies are expected to launch NCDs in coming months.

Individually, ECL Finance has sought SEBI approval to raise up to Rs 800 crore, Muthoottu Mini Financiers (Rs 250 crore), Kosamattam Finance (Rs 200 crore) and Sakthi Finance (Rs 100 crore).

So far, in the current fiscal (2014-15), Indian firms have raised more than Rs 8,000 crore via retail issuance of NCDs, which is more than the initial target of Rs 3,350 crore.

In the previous fiscal, about Rs 42,383 crore was generated through 35 issues.

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