The aversion to equities is visible with Shriram Transport’s Rs 500 crore non-convertible debenture issue receiving high interest from retail investors and high net worth individuals (HNIs).
The high interest levels are expected to result in more bond issuance in the coming days, bankers said. At least two others, State Bank of India and L&T Finance, have already talked of their intention to launch bond issues, especially focused on retail investors.
On Friday, SBI Chairman O P Bhatt said the country’s largest bank was looking to raise around Rs 200 crore through a retail bond issue during the first half of the current financial year. L&T Finance has already tapped the retail bond route twice to access funds. It had said it’d raise money through this route frequently.
Shriram Transport has expressed its intent to follow this option periodically. In the present round of fund raising, of the Rs 500 crore it is raising, Rs 200 crore each it meant to copme from retail investors and HNIs, while another Rs 50 crore each is earmarked for qualified institutional buyers and corporate investors. The non-banking finance company will offer a coupon of 9-9.75 per cent annually on secured portion.
“The details on the number of applications are still being collated but the feedback is that the response is overwhelming,” said a source, privy to the details of the issue.
After the global financial crisis intensified, a number of companies, including Shriram Transport, L&T Finance and Tata Capital, relied on bonds to access funds to push their business. Companies such as Tata Captial that had tapped the bond route had to wait for days before the retail investor portion of the issue was fully subscribed.
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“If the volatility in the stock market persists, retail investors would once again look at safer investor options and investing in a company that has a good track record makes sense,” said a senior executive at a bank.
Bankers, however, warned that getting the issues into the market was a time-consuming process and issuers may not be able to make full use of the opportunity thrown by the crisis in Europe. An issuer needs at least two months to get the regulatory clearance and market the issue to investors.
Non-banking finance companies tap the retail bond route to access funds as it also helps them build a strong brand recall among retail investors, who are potential customers.