Indian companies have mopped up nearly Rs 900 crore through retail issuance of non-convertible debentures (NCDs) in the ongoing fiscal year, thus garnering nearly twice the amount originally targeted through these issues.
Two non-banking finance companies -- Srei Infrastructure Finance Ltd and Shriram Transport Finance Company Ltd -- have tapped the NCD route so far in the current fiscal year (2013-14) with a target to mop up Rs 450 crore collectively.
Indicating strong investor demand for the retail debt market products, these two issues have managed to garner about Rs 870 crore through NCD route, as per the data compiled by market regulator Sebi.
In 2012-13, 15 companies had raked in nearly Rs 17,000 crore. 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 cannot be converted into stock and usually 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, Shriram Transport Finance Company Ltd garnered Rs 736 crore against the target of Rs 375 crore and Srei Infrastructure Finance Ltd raked in a total of Rs 134 crore against the base size of Rs 75 crore.
