Funds raised by Indian companies through retail issues of NCDs dropped by about 12 per cent to over Rs 29,000 crore last year, although this amount was much higher than the initial targets.
Non-Convertible Debentures are loan-related bonds that can’t be converted into stock but offer higher interest rate than convertible debentures.
According to the Securities and Exchange Board of India, 16 companies including NTPC, NHPC, IIFC and REC raised Rs 29,483 crore via NCDs last year. This was more than the Rs 16,875 crore that was initially targeted through NCDs.
In 2012, 17 firms had garnered Rs 33,439 crore through this route. The funds were raised mainly to support the financing activities and to meet working capital requirements.
Many firms including Indian Railways Finance Corporation (IRFC), India Infrastructure Finance Company, Housing and Urban Development Corp (HUDCO), National Housing Bank, Muthoot Finance, REC and Power Finance Corp (PFC) - tapped the NCD route twice in 2013.
Barring Jawaharlal Nehru Port Trust, Ennore Port, Dredging Corporation of India, National Housing Bank and Indian Railways Finance Corporation (second tranche), all the other issues managed to raise more than the targeted amount.
Market experts said funds raised by companies in 2013 were lower than the preceding year, but firms preferred this route over equity because of a lull in the stock markets.
“Indian debts are costly, still companies rushed towards this route for the fund raising activity in 2013 as equity was not available and there was lack of confidence among investors,” CNI Research’s Kishor Ostwal said.
Destimoney Securities’ MD and CEO Sudeep Bandopadhyay said the domestic companies have opted for debt route as they were not confident of raising funds through equity last year.
Another reason for the firms’ flocking towards the debt segment was to take advantage of the interest rate differential between bank loans and such bonds.
IRFC raised Rs 5,373 crore in 2013, as against the base size of Rs 1,000 crore while the Power Finance Corporation mopped-up Rs 3,876 against the target of Rs 750 crore.
Besides, REC raised Rs 3,441 crore as against the base size of Rs 1,000 crore, India Infrastructure Finance Company mopped-up Rs 2,884 crore against the target of Rs 1,500 crore.