Companies garner only Rs 4,100 cr via NCDs; prefer IPOs in market boom

New Delhi: Showing strong preference for the booming equity market, Indian companies have raised just about Rs 4,125 crore through the non-convertible debenture (NCD) route in the first nine months of the ongoing financial year.

They had, in contrast, garnered a staggering Rs 33,812 crore in the entire 2016-17. The current fiscal, 2017-18, ends on March 31.

Experts believe that companies preferred raising funds from equity market, which mostly came from initial public offering and issuance of shares to institutional investors.

"Bullish stock markets are the best time for promoters to raise capital as they can raise the required amount by diluting a lesser portion of their capital, or get a higher amount for the same amount of stake dilution," Bajaj Capital Senior VP and Head Investment Analytics Alok Agarwala said. Purvesh Shelatkar, Senior Vice President Institutional Equities, Centrum Broking said: "The falling domestic interest rates have led to flow of money in equities."

According to the latest data with the Securities and Exchange Board of India (Sebi), companies have raised funds totalling Rs 4,125 crore through retail issuance of NCDs in the April-December period of the current fiscal.

NCDs are loan-linked bonds that cannot be converted into stock and usually offer higher interest rates than convertible debentures.

The funds have been mobilised for business expansion, supporting working capital requirements and other general corporate purposes.

Individually, Muthoot Finance raised Rs 1,969 crore against a target of Rs 200 crore; Mahindra & Mahindra Financial Services mopped up Rs 1,150 crore compared with a target of Rs 250 crore, and Srei Equipment Finance garnered Rs 562 crore as against a base size of of Rs 500 crore.

Besides, Kosamattam Finance took the NCD route twice to raise money -- raising Rs 229 crore and Rs 214 crore.