Corporate bonds via private placement crosses over Rs 7 lakh crore in FY17

Highlights: 

• A total of 661 institutions have entered debt private placement market in FY17. 
• Financial services sector continued to dominate the debt market, collectively raising Rs.3,46,001 crore.
• Bond market has been due to higher raising by private sector.

Fund mobilisation through corporate bonds on private placement has reached to a whole new level – over Rs 7.03 lakh crore in the financial year 2016-17, Prime Database data show. 

A total of 661 institutions have entered debt private placement market this fiscal. 

On year-on-year, growth rate of 43% is a good sign for bond market compared to FY16 - where it stood at 6% versus 62% of FY15. 

Here's how bond markets have performed in last sixteen fiscal. 

Pranav Haldea, Managing Director of Prime Database stated the current performance of the bond market has been due to higher raising by private sector.

From the total, private sector made the highest mobilisation over Rs 3.31 lakh crore – a rise of 40% from Rs 2.36 lakh crore a year ago same period.

“ It is significant to note that the share of the Private Sector has been going up steadily and is now 47%; 6 years ago, it was just 23%,” said Haldea.

Not only this, All-India Financial Institution/Bank were also not faraway in tapping the bond market. This category has mobilised a total of Rs 2.84 lakh crore, higher by 42% as against Rs 1.99 lakh crore in the previou year of similar period.

Public sector undertakings (PSU) have also shown likeness towards the bond market, by increasing by 108% to Rs 67,176 crore this fiscal versus Rs 32,267 crore of FY16. State Financial Institution mobilised up to Rs 275 crore in comparison with zero action in FY16.

It was only state level undertakings who were reluctant in bond market this fiscal. Their mobilisation was down 14% to Rs 20,489 crore from Rs 23,848 crore of FY16.

On an industry-wise basis, the financial services sector continued to dominate the market, collectively raising Rs.3,46,001 crore or 49% of the total amount while power sector took second place with an 16% share or Rs 1.14 lakh crore.

Under company-wise performance in FY17, Housing Development Finance Corp (HDFC) took the lead in mobilisation through debt private placements with Rs 44,546 crore, followed by PFC (Rs.41,115 crore), NHAI (Rs.33,118 crore), LIC Housing (Rs.26,874 crore), REC (Rs.21,797 crore), U.P.Power Corp. (Rs.20,376 crore) and NABARD (Rs.20,371 crore).

Maximum amount of monies was raised in the maturity period of 3-5 years with a total of Rs 2.11 lakh crore, up by 30% on year-on-year (YoY) basis. Issue of as much as Rs 3.92 lakh crore or 56% of the overall amount were AAA rated.  

ICRA in one of its recent report said, “Benefiting from finer pricing in the bond markets, we expect the year-on-year growth of corporate bonds to remain substantial at 20-22 per cent in FY18. In absolute terms, the gross corporate bond issuance is expected to increase to Rs. 8.5 trillion in FY18 from an estimated Rs. 7.1 trillion in FY17."