Non-convertible debentures seem to be emerging as a preferred fund-raising option for companies, especially those from NBFC space, as they have lined up plans to raise more than Rs 19,000crore through this route.
NCDs (Non-Convertible Debentures) are loan-linked bonds issued by a company that cannot be converted into stock and usually offer higher interest rate than that of convertible debentures.
At least five companies -- Power FinanceBSE -1.86 %Corp (PFC), Housing and Urban Development Corp(HUDCO), India InfolineBSE 0.99 % Finance, Jagran PrakashanBSE 0.00 % and Thomas CookBSE 0.33 %-- have plans to collectively raise Rs 19,155 crore through the NCD route.
Individually, India Infoline plans to raise up to Rs 9,215 crore, while Hudco is looking to mop-up up to Rs 5,000 crore and PFC (up to Rs 4,590 crore).
Additionally, Thomas Cook and Jagran Prakashan have lined up plans to raise Rs 200 crore and Rs 150 crore respectively through NCDs.
Experts say the companies are flocking with their NCD issues as equity markets have been very volatile for quite some time and fund raising through the equity route is becoming difficult.
"Debt instruments, especially NCDs, seemed to be a preferred route for retail investors to park their funds as these are offering higher returns compared to most of the banks providing on fixed deposits," CNI Research Head Kishor Ostwal said.
The tenure of the bonds of three NBFC firms would be in the range of 10-15 years.
State-owned lending agency Rural Electrification CorporationBSE -1.23 % also launched last week a public issue of tax-free bonds to raise Rs 4,500 crore.
The proposed NCD issues indicate a revival in this market, as the companies had raised just Rs 2,217 crore through this route in first seven months of the current fiscal. In the previous fiscal ended March 31, Rs 35,611 crore was raised through NCDs.
In the current fiscal so far, Shriram Transport Finance CompanyBSE 0.34 % has raised Rs 600 crore through NCDs, while others include India Infoline Finance (Rs 500 crore), Shriram City Union financeBSE -1.43 % (Rs 431 crore), Religare Finvest (Rs 332 crore), Muthoot FinanceBSE 0.33 % (Rs 275 crore) and Srei Infrastructure FinanceBSE 1.23 % (Rs 77 crore).
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