Indian companies have mopped up over Rs 16,000 crore in the current fiscal by issuing non- convertible debentures (NCDs) to retail investors, garnering nearly three times the amount that was targeted.
Nine non-banking finance companies, including Power Finance Corp (PFC), Housing and Urban Development Corp (HUDCO) and Rural Electrification Corp (REC) have tapped the NCD route looking to mop up Rs 4,975 crore.
Srei Infrastructure Finance and Shriram Transport Finance Company have taken the NCD route twice between April and October - first seven 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 16,279 crore through NCD route in 2013-14 (April-October), as per the data compiled by market regulator Sebi.
In 2012-13, 15 companies had 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.
Non-convertible debentures are loan-linked bonds issued by a company that can't be converted into stock, but offer higher interest rate than convertible debentures.
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 raked in a total of Rs 4,467 crore, against the base size of Rs 750 crore, RFC 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, NHPC and India Infrastructure Finance Company mopped up 1,951 crore and Rs 1,228 crore respectively.