Bankers Predict Fundraise Via Public Issues To Pick Up In 2023: Report

In 2022, Indian firms raised about Rs 538 thousand crore ($64.95 billion) through private placements, while the public issues were only around Rs 8 thousand crore

Under tightening liquidity, investors may turn to the market for fundraising in 2023, according to bankers. A Reuters report quoted bankers and analysts saying that fundraising through public issues could see an uptick in 2023 as retail investors bet on attractive interest rates and companies look to diversify their funding portfolio under tightening liquidity conditions.

In 2022, Indian firms raised about Rs 538 thousand crore ($64.95 billion) through private placements, while the public issues were only around Rs 8 thousand crores, the report added. 

Ajay Manglunia, managing director and head of the investment grade group at JM Financial told Reuters, "As rates are settling at higher levels, retail investors would be keen to put funds in public issues. Companies could also use this window to diversify their funding profile, so we should see more issuances in January-March as well as in 2023."

The bankers said as the Reserve Bank of India (RBI) is looking to unwind the extraordinary stimulus offered during the pandemic and curtail surplus cash to tame inflation, issuers would be left chasing a limited pool of money from institutional investors, making private placements tougher, the report said. India Inc has traditionally preferred raising funds via private placements due to its ease, shorter execution time, and lower costs. 

Data for market regulator SEBI showed that companies raised Rs 12,710 crore and Rs 17,530 crore through public issues in 2020 and 2021 respectively. However, private funding stood at around Rs 800 thousand crore and Rs 630 thousand crore, respectively.

The bankers say, despite the higher costs of public issues, fund diversification and brand building for non-banking and micro-finance companies are likely to prompt interest from issuers. 

“We're expecting one more issuance to happen before the current financial year ends. Certainly, more companies will venture into public issue of bonds in the next year, ” Oommen Mammen, chief financial officer at Muthoot Finance told Reuters. 

"I think public issues are rising because the repricing of bank fixed deposits was very gradual, while public issues are realigning to market realities much faster," said Sudhir Agrawal, executive vice president, and fixed income fund manager at UTI Mutual Fund.

Although the bond market has been highly volatile in 2022 due to several issues, firms like Adani Enterprises and Indore Municipal Corporation are set to make their first-ever public bond offering in the upcoming year. 

Companies like L&T Finance Holdings, Indiabulls Housing Finance, and Muthoot Finance among others are lining up for public issues in January-March, merchant bankers said.