Falling deposit rates post demonetization are prodding retail investors to seek better returns in bond issuances of private companies.
According to bankers, private companies have managed to attract retail investors to their bonds that offer more than 9% for over two to three years, weaning them away from the traditional modes of investment like bank deposits. With one-year fixed deposits (FD) offering only around 6-7% returns, private bond issuances are a big draw.
On Monday, Srei Equipment Finance, a wholly-owned subsidiary of Srei Infrastructure Finance, said its issue of secured redeemable non-convertible debentures worth Rs 500 crore was fully subscribed within four days from the date of issue opening on January 3.
The issue was subscribed more than 1.12 times till the closure of the issue on January 6, based on the bid data available on websites of BSE and NSE.
The company received the maximum subscription from retail investors.
Reliance Housing Finance had raised Rs 3,000 crore in December when liquidity was an issue; Indiabulls Finance raised Rs 7,000 crore in September.
Among several others expected to hit the market soon, Muthoot Finance is likely to raise Rs 1,400 crore next week.
Ajay Maglunia, executive vice-president and head of fixed income at Edelweiss, said, “With one-year deposits of banks fetching just about 6-7% interest, investors, especially retail, rebalance their portfolio for better returns. Public issuances from the government-owned companies are very few with no tax-free or even taxable issuances on the cards.”
Home finance companies have been able to give a long-term growth commitment by offering attractive rates to retail investors, said Ravindra Sudhakar, chief executive officer, Reliance Home Finance.
“The tenure of these vary from three years and 10 years offering a steady return. We see a good appetite for reputed companies to raise long-term money in this market,” Sudhakar said.
The unsecured Non-Convertible Debentures (NCD) of Reliance Home Finance had different tenures of 3, 5 and 15 years, with a coupon rate varying from 8.7% to 9.15%.
Sanjeev Kumar, senior vice-president and head – resource mobilisation (retail liabilities), Srei Group, said, “Secured NCDs are a good investment option in the current market scenario as it gives investors the opportunity to lock their money for a longer period in a falling interest rate scenario. Public issue of NCDs will diversify the investor base in the bond market.”
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Srei Equipment Finance, a wholly-owned subsidiary of Srei Infrastructure Finance, said its issue of secured redeemable non-convertible debentures worth Rs 500 crore was fully subscribed within four days from the date of issue
The issue was subscribed more than 1.12 times till the closure of the issue on January 6, based on the bid data with BSE and NSE
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Reliance Housing Finance had raised Rs 3,000 crore in December when liquidity was an issue; Indiabulls Finance raised Rs 7,000 crore in September.
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