Expected to mop up Rs 350,000 crore for infra and other projects.
Public and private sector companies will mop up over Rs 3,50,000 crore through bonds to fund infrastructure and other projects this financial year, said an estimate by AK Capital Services Ltd — the largest non-banking company arranger. In comparison, Rs 1,72,000 crore was raised during FY 10.
The previous year’s budget decision – a roll back of tax deduction at source (TDS) on earnings from corporate bonds and permission for companies to sell bonds for 91 days instead of a minimum of 364 days – has increased the popularity of these bonds, said A K Mittal, managing director at A K Capital. He expects to see more changes in rules that will increase secondary market trading and issuance of these bonds.
Mittal expects demand from retail investors will lead to growth, unlike in the past when most buyers were large companies, banks and other financial services companies.
New companies that are developing infrastructure projects and often find it difficult to borrow from banks due to the small size of their balance sheet, may increasingly seek funds through the bonds route to finance their projects, Mittal said.
Companies raised Rs 55,000 crore in the three months ended June 30, compared with Rs 1,31,000 crore in 2008-09, he said. The average maturity of bonds by public sector companies is typically 10 years and by private companies five years, he said.
The decade-old company, which is mainly an arranger of bond issues, plans to raise Rs 400 crore selling shares to boost its balance sheet that would enable them to arrange funds for a company that needs to sell bonds urgently.
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The share sale to institutions may happen soon after the annual general meeting of shareholders on September 4. The promoters, who own about 59 per cent in the company, expect to retain a minimum 51 percent ownership, he said.
AK Capital posted 30 per cent increase in its net profit in the first quarter to Rs 14.1 crore. It plans to raise 400 crore to set up a debt marketing business and hire people to sell securities to wealthy individuals.
The firm will sell shares to large investors overseas to fund a possible acquisition to enter debt marketing, managing director Atul Kumar Mittal said at the company’s Mumbai office today.
“We want to create a flexible alternative to debt mutual funds for high-net worth individuals,” he said. “If they want low investment grade, and yet insist on high returns, we will provide that.”