Public issues of debt have gained traction with Indian corporates over the past four years, but private placement remains a more favoured route for raising funds.
Private placement of debt totalled Rs 865,983 crore during the 2008-09 to 2011-12 period, whereas public issues of debt added up to just Rs 49,062 crore.
The Indian bond market is small compared with other Asian countries, with the lack of liquidity being the biggest constraint.
The situation seemed to have improved in 2011-12, with a sharp rise in the number of public debt issues in comparison to previous years, likely because companies were finding it difficult to raise funds from other sources. There were 20 public debt issues in 2011-12, which raised Rs 35,611 crore, in comparison to 14 debt issues over the previous three years that managed to raise just Rs 13,451 crore. This was a 276.8 per cent rise in the value of trading in comparison to the previous year.
But private placement was even higher. While Rs 1,89,803 crore of private debt placement was reported to the NSE in 2011-12, private placement totalling Rs 56,974 crore was reported to the BSE. This was an over two-fold rise on the NSE and nearly five times higher on the BSE in comparison to 2007-08 levels.
Market lacks depth
What is more, in the first three months of the 2012-13 financial year, private placement of debt worth Rs 73,759 crore was reported to the stock exchanges, whereas not even a single public debt issue took place.
This has resulted in muted trading in the corporate debt market in terms of volumes and value in comparison to equities segment, with most investors abstaining from the market as it lacks sufficient depth. The market depth is further hampered by the fact that investors like to play it safe, with appetite restricted to top-rated companies.
Healthy trading
Nevertheless, the CDM segment has still managed to register significant growth. From 22,730 trades worth Rs 1,48,360 crore in 2008-09, there has been a 126 per cent rise in terms of volume and a three-fold rise in the value of trading to 51,533 trades worth Rs 5,93,783 crore in 2011-12.
Trading was also healthy in the first quarter of FY2012-13, with 15,095 trades worth Rs 1,51,326 crore, surpassing the value of trades in 2008-09 already.