Fundraising via private placement of corporate bonds hits 6-year low

Data from the market regulator, Sebi showed that in FY22, there were a total of 1,405 issues on BSE and NSE where the listed companies mopped up to ₹5,88,036.94 crore through private placements of corporate bonds- the lowest since the financial year 2015-2016.

In FY21, fundraising by listed companies on corporate bonds was at the highest level with 1,995 issues amounting to ₹7,71,839.98 crore.

Fundraising in this instrument stood at ₹6,74,702.88 crore in FY20, while it was ₹6,10,317.61 crore in FY19. The fundraising was at ₹5,99,147.08 crore and ₹6,40,715.51 crore in FY18 and FY17 respectively.

The fundraising in corporate bonds through private placement was at ₹4,58,073.48 crore in FY16. Although, during this fiscal issuance was at 2,975 on BSE and NSE.

Kamlesh Shah – MD of Share India Securities told PTI, that the lower fundraising through the private placement route in FY22 compared to the preceding fiscal could be attributed to the good performance of the equities in the stock market last year.

Ricky Kirpalani, Lead Sponsor, First Water Capital Fund (AIF) said, “During FY23, there should be some increase in raising of debt through bonds as corporate India presses the pedal on the next major phase of the CAPEX cycle. Also, with a potentially rising interest rate scenario, these bond issuances should evince good interest from risk-seeking investors,” reported by the mentioned news agency.

Currently, a Company Law Committee (CLC) has been formed by the Ministry of Corporate Affairs (MCA) to make recommendations on changes aimed at facilitating and promoting greater ease of doing business in the country and further efficient implementation of the Companies Act, 2013, the Limited Liability Partnership Act, 2008 and the Rules made thereunder.

Anand Lakra, Partner, J Sagar Associates (JSA) on a summary report of the Company Law Committee (2022) said, “The recommendations provide procedural flexibility to companies which would result in wider participation from shareholders and would be cost and time effective. The Report contemplates permitting companies to hold shareholder meetings in electronic/hybrid modes, doing away with affidavits and replacing them with self-declarations, maintenance of registers in electronic form and serving documents to shareholders in electronic form, etc. Such recommendations would facilitate the ease of doing business in India and bring in best practices from more developed markets.”

“Presently, fractional shares are not permitted to be issued or traded. Given the recent increase in retail shareholder participation in the public markets, this is an excellent recommendation as it would enable retail shareholders to trade in shares that hitherto were inaccessible. Since the Companies Act did not expressly regulate RSUs and SARs, it led to uncertainty about their ability to issue such instruments. RSUs, as an employee benefits tool, is prevalent in western markets and SARs have been in existence for publicly traded companies in India for quite some time under the relevant SEBI regulations” Anand Lakra added.