Private placement of corporate bonds at record high in FY23: report
- A combination of factors such as overseas borrowing turning pricier, surge in credit demand, higher bank loan rates and also large issuances by some issuers led to this
Over 800 corporates and institutions mobilised a record ₹8.3 trn of funds through private placement of corporate bonds in FY23, amid overseas borrowings turning pricier and higher interest rates at home, according to Prime Database.
Private placement refers to sale to pre-selected investors instead of a sale in the open market . Prime Database keeps data on the primary capital markets.
This was mobilised by 855 institutions and corporates. Such deals, listed and unlisted, which have a tenor and put/call option of above 365 days have been considered.
According to Pranav Haldea, Managing Director, PRIME Database Group, a combination of factors such as overseas borrowing turning pricier, surge in credit demand, higher bank loan rates and also large issuances by some issuers led to this.
According to primedatabase.com, the highest mobilisation in the year was made by the All-India Financial Institutions/ Banks category at ₹4,17,323 crore. This was in comparison to ₹2,68,413 crore in 2021-22, representing an increase of 55 per cent. An increase in mobilisation was also witnessed by the private sector (excluding banks/FIs), up by 12 per cent to ₹3,39,033 crore compared to ₹3,02,985 crore in 2021-22.
Government entities, put together, mobilised 40 per cent of the total amount, higher than 34 per cent in 2021-22. As per primedatabase.com, among government entities, All-India Financial Institutions/Banks led with a 78 per cent share followed by a 17 per cent share by PSUs.
The highest mobilisation through debt private placements during the year was by HDFC ( ₹78,415 crore) followed by NABARD ( ₹49,510 crore), PFC ( ₹42,097 crore), SBI ( ₹38,851 crore) and SIDBI ( ₹35,405 crore). The top 5 issuers of 2022-23 raised ₹2,44,277 crore in comparison to ₹1,61,895 crore raised by the top 5 issuers of 2021-22.
Maximum amount of monies was raised in the above 10 year maturity bucket ( ₹2.92 lakh crore or 35 per cent of the total amount) followed by 3-5 years bucket ( ₹2.62 lakh crore or 32 per cent of the total amount).
Almost three fifths of the total amount ( ₹4.93 lakh crore) was in 7-8 per cent coupon range and 18 per cent of the total amount ( ₹1.47 lakh crore) was in the 8-9 per cent coupon range. This was in contrast to 2021-22, wherein just 21 per cent of the issue amount was in 7-8 per cent coupon range, 6 per cent of the issue amount was in 8-9 per cent coupon range while a huge 52 per cent was in below 7 per cent coupon range.
Issues of as much as ₹5.58 lakh crore or 67 per cent of the overall amount were AAA rated.
On an industry-wise basis, the Banking/Financial Services sector continued to dominate the market, collectively raising ₹6,17,534 crore or 74 per cent of the total amount. Housing/Civil Construction/Real Estate sector ranked second with a 5 per cent share ( ₹38,152 crore).
The month of December 2022 saw the highest issuance at ₹1,24,073 crore (14.9 per cent) followed by March 2023 at ₹1,16,364 crore (14 per cent).
As many as 393 first-time issuers hit the market in 2022-23 in comparison to 381 last year.
Outlook for 2023-24
According to Haldea, corporate bond issuances are likely to slow down given the recent taxation changes in debt mutual funds which are big investors in this space.
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