Private Placement Of Debt Hit Record High Of Rs 7.7 Lakh Crore In 2020, Says Prime Database

Fund mobilisation through corporate bonds via the private placement route hit an all-time high of Rs 7.77 lakh crore through 637 issuances in 2020, a rise of 10% year-on-year, according to report.

Such issues had mobilised Rs 7.09 lakh crore in 2019, according to data collatated by Prime Database.

As against this, in 2001, debt raised through such route stood at a low Rs 50,019 crore and for the first such money-raising had crossed the Rs 1-lakh crore mark in 2007 when companies raised Rs 1,05 lakh crore, it said in the report.

Since then, it has been on a steady climb crossing Rs 2 lakh crore in 2010, Rs 3 lakh crore in 2012, Rs 5 lakh crore mark in 2015 and Rs 7 lakh in 2017 and then dipping to Rs 5.68 lakh crore in 2018, and again climbing back to over Rs 7.09 lakh crore in 2019, the report added.

The largest mobilisation through private placements of debt during the year was by HDFC Ltd. at Rs 57,813 crore, followed by REC Ltd. at Rs 53,946 crore, NHAI at Rs 53,463 crore, PFC (Rs 50,966 crore), and Nabard (Rs 50,734 crore), according to the report.

Prime Database Managing Director Pranav Haldea said the massive spike was due to record low interest rates, surplus liquidity and introduction of many liquidity windows by the Reserve Bank of India.

"The amount mobilised in 2020 was an increase of 10% over the Rs 7.10 lakh crore in 2019, despite 2020 being the pandemic year," Haldea said.

He added that the highest mobilisation in 2020 was done by the financial institutions and banks at Rs 3.47 lakh crore, up from Rs 3.37 lakh crore in 2019, representing an increase of 3%.

Similarly, corporates also issued a record amount of debt, up by 18% to Rs 2,94,171 crore as compared with Rs 2.49 crore in 2019. The amount mobilised by public sector undertakings also increased 13% to Rs 1.33 crore over 2019, it said.

Government organisations and government financial institutions together mobilised 53% of the total debt, lower than 58% in 2019. Among government organisations, national financial institutions and banks led with a 67% share, followed by 32% by PSUs, the report said.

While 24 national financial institutions and banks and their subsidiaries raised Rs 2.78 lakh crore or 36% of the total, two state financial institutions raised Rs 2,040 crore.

Twenty-one central PSUs mopped up Rs 1.33 lakh crore or 17% of the total, while two state PSUs mobilised Rs 350 crore totalling Rs 4,15,107 crore or 53% of the pie.

Eight private sector banks and financial institutions have mopped up Rs 68,196 crore, while 260 non-banking financial companies mopped up Rs 1.57 lakh crore or 20% of the total.

Ten-year tenor got the maximum amount of money at Rs 2.86 lakh crore or 37% of the total, followed by 3-5 year bucket at Rs 2.41 lakh crore or 31%.

As much as 43% or Rs 3.33 lakh crore of the total was in the sub-7% coupon and 36% of the total amount was in the 7-8% coupon.

This was in contrast to 2019, when just 6% of the issues was in below 7% coupon, 26% of the issue amount was in 7-8% coupon and 41% was in the 8-9% coupon range.

Significanly, as much as 78%t of the issues or Rs 5.90 lakh crore of the overall amount were AAA-rated.

Haldea expects a dip in issuances in 2021 on account of easing of some of the liquidity measures and higher funding costs.