Indian corporates garner estimated Rs 6.3 lakh crore from markets in 2016, bet big on debt instruments

Bullish on raising finance from capital markets, Indian companies have garnered an estimated Rs 6.3 lakh crore from the marketplace in 2016, with debt instruments being the most sought after route to raise money for their business needs amid volatile trends in equities.

Experts believe the corporates will continue to prefer debt route over equity markets for raising capital in the new year as well in the wake of the fall in interest rates, surplus liquidity in the banking system and an easier regulatory framework for issuance of debt securities.

Sentiments in equity markets have also weakened due to the demonetisation move and experts believe this trend may continue at least for the initial part of 2017.

Out of the cumulative total of Rs 6.3 lakh crore garnered this year from capital markets in 2016, a large chunk or more than Rs 5.5 lakh crore has been mopped up from debt market.

In 2015, firms had raised a similar amount and most of the funds were mobilised through debt markets that year too.

Fresh capital collected from equity market stands at nearly Rs 80,000 crore for 2016, which mostly came from preferential share allotments to promoters and initial public offerings.

These funds have been raised mainly for expansion of business plans, repayment of loans and to support working capital requirements.

"In the wake of the fall in interest rates, surplus liquidity in the banking system and an easier regulatory framework for issuance of debt securities, firms may find debt as the preferred route for raising capital in 2017," Bajaj Capital's Senior VP and Head of Investment Analytics Alok Agarwala said.

"With surplus liquidity and lower lending rates, banks may be preferred as a source of capital in 2017. As interest rates and emerging market currency volatility have risen globally, firms shall find domestic markets relatively more attractive as compared to overseas markets for raising money," he added.

Echoing a similar view, Geojit BNP Paribas' Chief Investment Strategist V K VijayaKumar said the scenario is a bit uncertain for the upcoming year as demonetisation and the massive disruption that it has caused in the economy has increased the uncertainty factor.

"India's GDP growth and corporate earnings will be subdued for at least for two quarters in calendar 2017. The stock market as well as the primary market are likely to discount this.

"The Modi government is likely to press ahead with its anti-black money drive in 2017 too, with the focus shifting to benami property. This is likely to create further flutter in the market. US President Donald Trump's policies will also impact markets in a big way," Vijaya Kumar said.

In the debt segment, companies have mopped up Rs 5.13 lakh crore through debt placement route while Rs 38,600 crore has been raised through public issuance of debt this year.     

Within the equity segment, preferential allotment of shares helped garner Rs 29,850 crore, followed by IPO (Rs 25,163 crore), Offer For Sale through stock exchange mechanism (Rs 13,112 crore) QIP or Qualified Institutional Placement(Rs 4,481 crore), rights issue of shares (Rs 1,230 crore) and FPOs or Follow-on Public Offers (Rs 10 crore).      

When it came to overseas markets, Indian firms have raked in a total of Rs 400 crore through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).