Indian companies have mopped up over Rs 4,800 crore so far this financia year through non-convertible debentures (NCDs) to retail investors, garnering nearly three times the amount that was actually targeted.
Four non-banking finance companies — Srei Infrastructure Finance Ltd, Shriram Transport Finance Company Ltd, Rural Electrification Corp and Muthoot Finance — have tapped the NCD route so far in 2013-14. They had a target to mop up Rs 1,700 crore collectively.
Interestingly, Srei Infrastructure Finance has taken the NCD route twice between April and September.Indicating strong investor demand for the retail debt market products, these companies have managed to garner about Rs 4,809 crore through NCD route, as per the data compiled by market regulator Sebi.
In 2012-13, 15 companies had raked in nearly Rs17,000 crore via NCDs. In comparison, a cumulative amount of Rs 35,611 crore was garnered by 16 firms through their NCDs in the preceding year.
In 2012-13, 15 companies had raked in nearly Rs17,000 crore via NCDs. In comparison, a cumulative amount of Rs 35,611 crore was garnered by 16 firms through their NCDs in the preceding year.
Non-convertible debentures are loan-linked bonds issued by a company that can't be converted into stock, but offer higher interest rate than convertible debentures. Most of the funds were raised to support financing activities and to meet working capital requirements.
Experts say that volatile conditions in the equity markets have led to companies opting for the NCD route to raise funds. Besides, investors are attracted to good returns being offered in these NCD issues. "Debt instruments, especially NCDs, have emerged as a preferred route for retail investors to park their funds as these were offering higher returns compared to what most of the banks providing on fixed deposits," a market analyst said.
"While banks offer a return of about 8.75% for a five-year period, NCDs of a similar tenure can offer between 10% and 12%," he added. Individually, REC garnered Rs 3,510 crore against the target of Rs 1,000 crore, Shriram Transport Finance Company Ltd mopped up Rs 736 crore against the base size of Rs 375 crore and Muthoot Finance raked in Rs 324 crore against the target of Rs 150 crore.
Besides, Srei Infrastructure Finance launched two issues. In April, it raked in a total of Rs 134 crore against the base size of Rs 75 crore, and the company raised Rs 105 crore in September against the base size of Rs 100 crore.
