Non-convertible debentures have emerged as preferred option to raise funds for companies, especially NBFCs, as they garnered Rs 35,000 crore through this route in 2012 -- a 3-fold jump from the preceding year.
Moreover, two companies -- Housing and Urban Development Corp (HUDCO) and India Infoline Finance -- are in the process of collecting over Rs 14,000 crore through the NCD route.
Additionally, Thomas Cook had announced plans to raise Rs 200 crore through NCD route on a private placement basis.
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.
According to information available with market regulator Sebi, as many as 12 companies mopped-up Rs 35,038 crore last year through various tranches, a steep hike from Rs 12,753 crore garnered in 2011.
Most of the funds were raised to support financing activities and to meet working capital requirements.
Experts say the companies have chosen NCD route as the equity market continued to be volatile last year, even though it had given good return to investors, making it difficult for firms to raise funds.
"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 most of the banks providing on fixed deposits," CNI Research Head Kishor Ostwal said.
"While banks offer a return of 9-9.5 per cent for a 5-year period, NCDs of a similar tenure can offer between 10 per cent and 12 per cent," he added.
In 2012, National Highway Authority of India (NHAI) raised the maximum amount via NCDs by garnering Rs 10,000 crore. Indian Railways Finance Corp mopped-up Rs 6,269 crore and Rural Electrification Corp (REC) raked in a total of Rs
5,046 crore through two tranches.
Other major NCDs were - Power Finance Corp (Rs 4,744 crore) through two tranches, followed by HUDCO (Rs 4,685 crore), IDFC (Rs 855 crore) through two tranches, Muthoot Finance (Rs 719 crore) through two tranches, Shriram Transport
Finance Company Ltd (Rs 600 crore) and India Infoline Finance (Rs 500 crore).
Investors were being offered interest rate between 7.3 per cent and 12.6 per cent per annum through these NCDs. Most of the NCDs' tenures ranges for 10 and 15 years.
Market analysts said investment in NCDs should not exceed 14-15 per cent of an investor's debt portfolio.
Market analysts said, meanwhile, investors should look for parking funds in more than one NCD to