India Inc fundraising via private placement reaches Rs 8.97 trn in 2023

Corporate India is using the cost-effective private placement route to secure funds, surpassing the previous record with three weeks to spare, amid increased credit demand and favorable financing costs. This has resulted in the total value of corporate debt, through private placement of corporate bonds, reaching a new record of Rs 8.97 trillion by 2023, according to a report by The Economic Times (ET). The previous record was set at Rs 7.95 trillion in 2020.

Within this amount, public sector banks and financial institutions account for Rs 3.15 trillion, private sector non-banking financial companies (NBFCs) have raised Rs 2.21 trillion, and corporate entities have secured Rs 2.06 trillion. Private sector banks and public sector companies have also contributed significantly, securing Rs 1.15 trillion and Rs 35,743 crore respectively.

According to ANDFund managers believe that private placement has become the preferred and cost-efficient method for raising capital quickly, compared to alternatives such as IPOs, QIPs or traditional bank loans. Factors such as expensive foreign loans, a surge in credit demand and higher interest rates on bank loans can also contribute to the popularity of this form of fundraising. Benefits include price discovery through bidding, bidder confidentiality, and lower financing costs.

Private placements also provide a strategic opportunity for companies, allowing institutional investors and high-net-worth individuals access with relatively fewer disclosures and compliance requirements. The benefit extends to investors, allowing them to invest in debt of robust business entities.

The driving force behind this rise in private placements is reportedly driven by India's robust economic performance, with growth of 7.6 percent in the September quarter, exceeding expectations. The manufacturing sector, which represents almost 19 percent of the economy, recorded a high growth of 13.9 percent in nine quarters, contributing to increased economic activities.