Private sector looks abroad for funds

Just a week ahead of the RBI rate meeting, the data on debt raised through private placement shows companies are not confident of an interest rate cut.

Data from Sebi shows companies have collected Rs 39,025 crore through this route in January. This is the highest level in the last six months.

While Sebi data does not show sector wise details, a slightly older set from Prime Database shows the private sector non-financial companies have recorded a sharp 78 per cent rise year-on-year.

It is outstripping bank lending and making up for the slowdown in ECB fund raising. The Sebi data shows Indian firms have raised a total of Rs 3,02,668 crore in the April to January period, a 15 per cent jump over the last year.

Private placements is a method of raising capital where firms issue debt securities or bonds to institutional investors instead of routing their offers through the capital markets. The amount raised in January is the highest sum raised by Indian companies through private placement since July 2012, when they had raised Rs 57,745 crore. The increase is also visible in the more diversified nature of the sectors trying out this route.

So commensurate with the rise of the private sector, the share of government organisations and financial institutions, the usual leaders of the pack has declined from 77 per cent last year to 68 per cent this year. Private sector non financial companies have moblised Rs 75,214 crore in a year when bank lending has withered. Obviously with bank credit drying up a sharp rise in the debt private placement from the private sector was expected. Plus it is easy compared to the time lag with public placement. The other option of raising funds from the equity market is in any case out as there has been little activity there through most of 2012.

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