Fund raising through retail issuance of non-convertible debentures slumped 79% to ₹882 crore in the first four months of this fiscal due to falling institutional participation and decline in credit ratings of such instruments.
Fund raising through retail issuance of non-convertible debentures (NCDs) slumped 79% to ₹882 crore in the first four months of this fiscal due to falling institutional participation and decline in credit ratings of such instruments.
A total of five firms — Muthoottu Mini Financiers, Muthoot Fincorp, Kosamattam Finance, KLM Axiva Finvest and Sakthi Finance — have mopped-up funds totalling ₹882 crore through retail issuance of NCDs in the current fiscal till July 13, data with markets regulator Securities and Exchange Board of India (Sebi) showed.
In comparison, a total of 11 companies had collected ₹4,177 crore through this route in the April-July period of 2019-20, as per the data.
The financiers have raised the NCDs to strengthen their balance sheets, which is heavily impacted due to the coronavirus pandemic, retire existing debt and support working capital requirements, said Divam Sharma, co-founder of Green Portfolio, a Sebi-registered portfolio management service.
He, further, said fund raising through NCDs have fallen “due to falling institutional participation, falling credit ratings of the instruments and increasing concern of defaults from the borrowers of these financiers”.
NCDs are loan-linked bonds that cannot be converted into stocks and usually offer higher interest rates than convertible debentures.
“We have seen significant decline in fund raising by corporate houses through NCDs, due to the uncertain business environment in the midst of COVID-19,” Ashika Wealth Advisors co-founder and CEO Amit Jain said.
Individually, Kosamattam Finance raised ₹297 crore as against a target of ₹150 crore.
While Muthoottu Mini Financiers mopped up ₹198 crore, Muthoot Fincorp raked in ₹160 crore, KLM Axiva Finvest raised ₹124 crore and Sakthi Finance garnered ₹102 crore.
In the entire fiscal 2019-20, companies had raised ₹14,984 crore.