Indian companies mopped up over Rs 15,000 crore in the April-November period by issuing non-convertible debentures (NCDs) to retail investors, nearly three times the amount that was targeted by such offerings.
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.
Nine non-banking finance companies, including Power Finance Corp (PFC), Housing and Urban Development Corp (HUDCO) and Rural Electrification Corp (REC) tapped the NCD route looking to mop up Rs 5,125 crore. Srei Infrastructure Finance, Shriram Transport Finance Company and Muthoot Finance have taken the NCD route twice between April and November - first eight months of the current fiscal, 2013-14.
Also, all the issues managed to raise more than their targeted amounts.
Indicating strong investor demand for the retail debt market products, these companies have managed to garner about Rs 15,042 crore through NCD route in 2013-14 (April-November), as per the data compiled by market regulator Sebi.
In entire 2012-13, 15 companies raked in nearly Rs 17,000 crore via NCDs. In comparison, a cumulative amount of Rs 35,611 crore was garnered by 16 firms through their NCDs in the preceding fiscal year.
Most of the funds were raised to support financing activities and to meet working capital requirements.
Volatile conditions in the equity market have led companies to opt for the NCD route to raise funds. Investors too have been attracted to the 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 per cent for a five-year period, NCDs of a similar tenure can offer between 10 per cent and 12 per cent," he added.
Individually, PFC raised a total of Rs 3,876 crore, against the base size of Rs 750 crore, REC mopped up Rs 3,440 crore against the target of Rs 1,000 crore and HUDCO garnered Rs 2,370 crore against the base size of Rs 750 crore.
Against the base size of Rs 500 crore, India Infrastructure Finance Company and NHPC mopped up Rs 1,213 crore and 1,000 crore and respectively.