A high interest rate regime seems to be affecting the companies' appetite for raising capital through private placement of debt securities or bonds, as the quantum of such funds dropped by 12% in the first half of the current fiscal.
According to data compiled by Prime Database, Indian firms mopped-up Rs 1,02,590 crore through 96 debt private placements during April-September period of current fiscal, down from Rs 1,16,524 crore mobilised in the year-ago period.
In debt private placements, the entities issue debt securities or bonds to institutional investors, but the attractiveness of this route seems to have been hit due to rising interest rates, experts say.
The funds raised by all-India financial institutions and banks declined by 9% to Rs 67,583 crore in the first half of the fiscal year 2011-12.
At the same time, the funds raised by the private sector fell by 36% to Rs 21,264 crore in this period.
Prime Database's Prithvi Haldea said that the fund mobilisation by PSUs, however, rose by 49% to Rs 11,718 crore in the first half of current fiscal. The funds raised by state-level undertakings was lower, although.
All the government organisations and financial institutions together accounted for 79% of total funds raised during this year, up from 71% a year ago.
In terms of sectors, financial services segment dominated the market with a 74% share of total funds, followed by power sector with 8% share.
The highest mobilisation through debt private placements during this period were by PFC (Rs 14,896 crore), followed by HDFC (Rs 11,740 crore), REC (Rs 9,603 crore), NABARD (Rs 6,799 crore) and Air India (Rs 5,500 crore).
Raising of funds through private placement of shares with institutional investors, known as QIPs (Qualified Institutional Placements), has also been hit.
The experts say that the shares of many companies, having sold shares to institutional investors in the past, are trading below the issue price.
"On the back of depressing market conditions, the QIP market seems (to have) virtually dried up in 2011. Indian companies are facing a difficulty in fund raising," SMC Global Securities Strategist and Head of Research Jagannadham Thunuguntla said.
"This will surely impact expansion plans and capacity building in the coming years, resulting in a slowdown in IIP and GDP numbers," he added.
The stock market's 30-share Sensex plunged by 2,991.46 points or over 15% during the first half of the current fiscal to close at 16,453.7 as on September 30, as stocks were battered by challenging macro-economic situation and debt crisis in Europe.