Indian companies raise record Rs 9.41 lakh crore from private bond placements

The upcoming fiscal year 2024-25 is anticipated to be strong, with companies continuing to seek capital for capital expenditures after the election results. Neha Agarwal, Managing Director & Head of Equity Capital Markets at JM Financial Ltd, stated, "India is poised to become the third largest economy globally by 2027, benefiting from pro-business reforms and macroeconomic stability."

Data from Prime Database shows that the amount raised through debt private placement in 2023-24 reached Rs 9.41 lakh crore, up from Rs 8.52 lakh crore in the prior year. This was sourced from 904 institutions and corporates.

Additionally, real estate investment trusts (REITs) and infrastructure investment trusts (InVITs) conducted 17 debt private placements, collecting Rs 14,155 crore.

The funds were utilized to strengthen balance sheets, retire existing debt, and support working capital requirements. Private placement of bonds involves issuing securities or bonds to institutional investors for capital raising.

Experts suggest that private placement has become a preferred and cost-efficient method for fund mobilization compared to alternatives such as initial public offerings (IPOs), qualified institutional placements (QIPs), and bank loans.

Increased credit demand, rising bank loan rates, and costly overseas borrowing likely contributed to the higher fund collection through private placement. Notable mobilizations through debt private placements were by NABARD (Rs 51,855 crore), REC (Rs 48,976 crore), and HDFC (Rs 46,062 crore).

Aside from the private placement of corporate bonds, the public bonds market also experienced significant growth, with 48 issues raising Rs 20,757 crore compared to 32 issues raising Rs 7,444 crore the previous year. The largest issue was from PFC, raising Rs 2,824 crore.