Pvt placement still dominates by far corporate fund raising

Close to 90 pc resources raised through private route

MUMBAI: Private placement mechanism dominated the resource mobilization by Indian corporates during 2017-18 accounting for 86.88 per cent of the total funds raised by them during the year, according to statistics released by Securities and Exchange Board of India (SEBI).

While total resources raised by the Indian corporates during the year ended March 31, 2018 reached Rs8.40 trillion, Rs7.30 trillion found its route through private placement. This was around 87 per cent of the total fund raised during the period.

The dominance of private placement – in both equity as well as debt issues, was much more pronounced during the previous year as close to 92 per cent of the funding needs by the corporates at Rs7.55 trillion, was met through private placement (during 2016-17).

The trend may be ascribed to the hefty disclosure requirements the public issues demand as part of the process. Even a weak demand or low response to a public issue could show the issuer in bad light and tell upon the reputation of the corporate entity.

During 2016-17, the corporates mostly relied on debt issues to quench their financial needs over equities, with 89 per cent of the corporate funding was done through debt issues leaving a paltry 11 per cent for the equity stream.

However, 2017-18 saw an uptick in equity issues – both public and rights, and this shift has resulted in the fund raising through equity route reaching 28 per cent – a spurt from the previous year’s 11 per cent.

Publicly issued debt is yet to catch up in India with the lion’s share of debts raised by the corporates is through private placement.

For example, the year 2016-17 witnessed only Rs29,363 crore being raised through publicly floated debt issues, with the amount dropping drastically to Rs4953 crore during 2017-18.

 

 

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