Rate hike hits corporate bonds

New Delhi: Fund raising by listed companies through private placement of corporate bonds dropped 39 per cent to Rs32,405 crore in the first two months of the current financial year, and outlook for the rest of the fiscal is uncertain too on expectation of further hike in interest rates.

In comparison, Rs53,253 crore was raised through the route during April-May 2021-22, data with the Securities and Exchange Board of India (Sebi) showed. Notably, fund raising through the route plunged to a six-year low in 2021-22 to Rs5.88 lakh crore owing to good performance of the equities and aggressive fund disbursal by banks at lower interest rate.

"Moreover, the outlook for the rest of the financial year is quite uncertain as interest rates are expected to firm up further, liquidity to get tighter and inflation to remain high. In such an environment, aggregate demand is likely to remain subdued thereby suppressing the demand for credit as well," said Sandeep Bagla, CEO, Trust MF.

Several factors will dictate fund raising activities through the mode like peaking interest rate cycle, sentiment revival in capex cycle and peaking currency depreciation cycle, said Divam sharma, co-founder, Green Portfolio.

Fund raising by companies listed on BSE and NSE was subdued at Rs32,405 crore in April-May of the current financial year 2022-23. This was 39 per cent lower compared to the year-ago period. Listed firms have raised lower amount of funds through bonds and the credit off-take from banks has been slow as well. It is possible that the listed firms are sitting on surplus cash, Bagla said.