Mumbai: Fundraising through private placement of debt by India Inc hit a record high in the last financial year as a recovery in economic growth and surging interest rates abroad prompted companies to flock to the local market to raise capital.
Resource mobilisation in the private placement market was at ₹8.83 lakh crore in FY23, the highest on record, provisional data in the Reserve Bank of India’s latest Handbook of Statistics on Indian Economy showed. In 2021-22, funds raised through private placement were at ₹6.32 lakh crore, the data showed. The figures are compiled based on data received by the RBI from merchant bankers, financial institutions, and stock exchanges.
In the current financial year, the private sector, comprising financial institutions and non-financial institutions, clocked up 1,398 issuances worth a total of ₹4.69 lakh crore. Meanwhile, public sector financial institutions and non-financial institutions carried out 256 issuances worth a total of ₹4.14 lakh crore, the data showed.
“The domestic market has been conducive for corporates to borrow. One of the reasons was the higher refinancing demand because of tighter liquidity conditions in the banking system. The refinancing demand from all-India financial institutions like SIDBI, NABARD and NHB went up,” said Anil Gupta, senior vice president & co-group head at rating agency ICRA.
Moreover, banks stepped up debt issuances last year to finance booming credit growth amid a far slower pace of deposit growth. “Typically, we see around ₹1 lakh crore of bond issuances, but last year, we saw close to ₹2 lakh crore,” ICRA’s Gupta said.
Although the RBI began raising interest rates in the previous financial year, with the repo rate increasing by 250 basis points between May 2022 and February 2023, rate hikes in the US and other advanced economies were significantly more aggressive. This made it far more expensive for corporates to tap overseas debt capital markets, increasing the appeal of local markets.
With economic recovery picking up steam after the shocks of the Covid-19 crisis, bank credit growth jumped to decadal highs in the previous financial year. However, amid tighter liquidity conditions in the banking system, deposit growth lagged, exerting pressure on lenders to mobilise funds to finance the strong demand for loans.
Analysts expect bond issuances in the current financial year to remain strong, with large-scale issuances by HDFC prior to its merger with HDFC Bank pushing up debt sales in the first quarter of the year. The erstwhile housing financier issued bonds worth close to ₹45,000 crore from April 1 till its merger with HDFC Bank in mid-July. Overall corporate debt issuances in April-June stood at about ₹2.7 lakh crore, market players said.
