Cos tap NCDs to raise Rs1,500 cr

Non-convertible debentures seem to have become preferred option for companies to raise funds as well as for investors eyeing good returns, with issues worth Rs 1,500 crore hitting the market this month and another Rs 650 crore worth of offers in the pipeline.

It is mostly non-banking finance companies (NBFCs) that are tapping non-convertible debentures (NCDs) route to raise funds to support their financing activities.

Investors are being offered returns of over 12 per cent per annum through these NCDs, as against an average equity market return of around 9 per cent. Bank fixed deposits also offer similar rates of return. The mutual funds seem to offer much lower returns.

Experts believe companies are flocking with their NCD issues as equity markets have been very volatile for quite sometime and fund raising through equity route is becoming extremely difficult.

These NCDs with tenure of three to six years are offering return between 11.5 per cent and 12.75 per cent. In comparison, banks are offering return of 8.75-10 per cent for a lock-in period of up to five years.