In April and May, the amount raised through debt placement falls to Rs 32,405 crore

53,253 crore were raised through the method between April and May 2021–2022.

The amount of money raised by listed businesses through the private placement of corporate bonds fell by 39% to ₹32,405 crore in the first two months of the current fiscal year.

The likelihood of an additional interest rate increase also casts doubt on the prognosis for the remainder of the fiscal year.

Data filed with the Securities and Exchange Board of India (Sebi) showed that over the period of April to May 2021–22, ₹53,253 crore was raised through the method.

Notably, due to the strong performance of the stock market and banks’ aggressive fund-disbursement policies at lower interest rates, fundraising through this avenue fell to a six-year low of ₹5.88 lakh crore in 2021–22.

According to Sandeep Bagla, CEO of Trust MF, the forecast for the remaining months of the fiscal year is fairly hazy because higher interest rates, tighter liquidity, and persistently high inflation are all predicted. According to him, in such a situation, aggregate demand is expected to stay muted, which will reduce credit demand as well.

The co-founder of Green Portfolio, Divam Sharma, claims that a number of elements, including a spiking interest rate cycle, a sentiment recovery in the CAPEX cycle, and a peaking currency depreciation cycle, will determine fundraising efforts through this mechanism.

During the first two months of the current fiscal year 2022–23, companies with stock on the BSE and NSE raised a meagre ₹32,405 crore. This was 39 percent less than the same time last year.

Bonds have been used by listed companies to raise less money, and banks have been cautious to extend loans.

As a result of rate hikes by central banks around the world to combat inflation, according to Sonam Srivastava, founder of Wright Research and a Sebi-registered investment advisor, investors in the stock market now anticipate higher returns. This inevitably results in higher borrowing costs and lower returns on corporate bonds for listed companies, she continued.

According to Sharma of Green Portfolio, the increase in bond yields brought on by high inflation and the ensuing predictions of rising interest rates have caused a correction in bond prices.

The 10-year bond yield in the US hit 3.3 percent in the first two months of the current fiscal, and this, together with concerns of currency depreciation, discouraged institutional investors from making long-term investments in these bonds.

In terms of issuance, 137 issues were seen during the period under examination versus 192 issues in April-May 2021–2022.

The central banks will implement rate increases in the near future, which will reduce the amount of corporate bond market activity.

For publicly traded corporations, corporate bonds offer the most flexible means of raising capital. These companies utilise the money they receive from corporate bonds to increase their product and service offerings, build new factories, acquire equipment, and finance CAPEX.

When a firm has to raise money, it chooses to use corporate bonds because they don’t dilute the equity of current promoters and shareholders.

Companies in the financial sector primarily use the debt markets to raise capital reserves and fund further lending.

The non-financial group uses the money mostly for ordinary corporate operations, capital expenditures, and inorganic development prospects, aside from repaying current debt.

In addition to the money raised through the private placement of corporate debt, a total of 1,682 crore came from the public issuance of corporate debt during the period under review.

Experts assert that a greater to steady level of system liquidity and a generally lower credit offtake would maintain a low dependence on public issuance of corporate debt.