Fundraising through the retail issuance of non-convertible debentures (NCDs) fell 79% to ₹882 crore in the first four months of this fiscal year due to declining institutional ownership and lower credit ratings of these instruments.
In total, five companies – Muthoottu Mini Financiers, Muthoot Fincorp, Kosamattam Finance, KLM Axiva Finvest and Sakthi Finance – absorbed funds totaling ₹882 crore from MNT’s retail issuance in the current fiscal year through July 13, data with market regulator Securities and Exchange Board of India (Sebi) showed.
By comparison, a total of 11 companies collected ₹4,177 crore by this route in the period from April to July of 2019-2020, according to the data.
Financiers have increased NTMs to strengthen their balance sheets, which is being heavily impacted by the coronavirus pandemic, cancel existing debt and support working capital needs, said Divam Sharma, co-founder of Green Portfolio, a management service portfolio registered by Sebi.
He further stated that fundraising through NTMs had fallen “due to declining institutional participation, declining credit ratings of instruments and growing concern about defaults by borrowers from these financiers.” .
NCDs are loan bonds that cannot be converted into shares and generally offer higher interest rates than convertible debentures.
“We have seen a significant drop in corporate fundraising across NCDs, due to the uncertain business environment amid COVID-19,” said Amit Jain, co-founder and CEO of Ashika Wealth Advisors.
Individually, Kosamattam Finance raised ₹297 crore against a target of ₹150 crore.
While the Mini Financiers Muthoottu mopped up ₹198 crore, Muthoot Fincorp raked ₹160 crore, KLM Axiva Finvest raised ₹124 crore and Sakthi Finance raised ₹102 crore.
During the full 2019-20 fiscal year, companies raised ₹14 984 crore.