Companies mop up Rs 900 cr through issue of retail NCDs

Indian companies have mopped up nearly Rs 900 crore through retail issuance of non-convertible debentures (NCDs) in the ongoing financial year, thus garnering nearly twice the amount originally targeted through these issues.

NCDs are loan-linked bonds issued by a company that cannot be converted into stock and usually offer higher interest rate than convertible debentures.

Two non-banking finance companies (NBFCs) - Srei Infrastructure Finance and Shriram Transport Finance Company - have tapped the NCD route so far in the current fiscal year (2013-14) with a target to mop up Rs 450 crore collectively.

According to the data compiled by the Securities and Exchange Board of India (Sebi), these two issues have managed to garner about Rs 870 crore through NCD route, indicating strong investor demand for the retail debt market products.

Most of the funds were raised to support financing activities and to meet working capital requirements.

Experts say that volatile conditions in the equity markets have led to companies opting for the NCD route to raise funds. Besides, investors are attracted to good returns being offered in these NCD issues.

"Debt instruments, especially NCDs, have emerged as a preferred route for retail investors to park their funds as these were offering higher returns compared to what most of the banks providing on fixed deposits," a market analyst said.

"While banks offer a return of about 8.75 per cent for a five-year period, NCDs of a similar tenure can offer between 10 per cent and 12 per cent," he added.

Individually, Shriram Transport Finance Company garnered Rs 736 crore against the target of Rs 375 crore and Srei Infrastructure Finance raked in a total of Rs 134 crore against the base size of Rs 75 crore.

In 2012-13, 15 companies had raked in nearly Rs 17,000 crore. In comparison, a cumulative amount of Rs 35,611 crore was garnered by 16 firms through their NCDs in the preceding year.

With inputs from PTI