India Inc sells record debt to savers amid credit crunch

Debt offerings to the public by companies surged to Rs154.43 billion($2.29 billion) in the first two months of the financial year started April 1, the most on record for the period and up eight-fold from a year earlier

India’s bad-debt problems and bond-market volatility are making it harder for companies to borrow from institutions, prompting the firms to seek funds from savers instead and pushing up their sales of rupee notes to individuals to a record.

Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India, on Tuesday, Jan. 30, 2018. Indian Prime Minister Narendra Modi has a tough balancing act in this week's budget: maintaining fiscal prudence or handing out cash to placate rural voters ahead of next year's election. Photographer: (Dhiraj Singh/Bloomberg)

Debt offerings to the public by companies surged to Rs154.43 billion($2.29 billion) in the first two months of the financial year started April 1, the most on record for the period and up eight-fold from a year earlier, Securities & Exchange Board of India data showed.

For individual investors, the corporate bonds are a way to earn higher yields than bank deposits. Dewan Housing Finance Corp., whose public issuance of notes was India’s largest last month, offered three-year securities at 8.9%, for example, compared with a 6.7% rate for similar-maturity deposits at the State Bank of India.

For companies, selling bonds to individuals means having to shell out a little more than issuance to institutions. But they have little choice as banks hold back from lending amid a crackdown on bad debt, professional investors avoid notes due to the market’s volatility, and the rupee’s weakening makes it difficult for firms to borrow money overseas, according to Shashi Kant Rathi, executive vice president and head of treasury and markets at Axis Bank Ltd.

The company notes to individuals are selling out quickly. Dewan Housing’s securities were fully subscribed within two days from opening, while JM Financial Credit Solutions Ltd.’s debut issuance closed within a day.

Other companies are lining up too, with Indiabulls Housing Finance Ltd. seeking ratings for Rs 120 billion rupees and Shriram Transport Finance Co. for a 50 billion rupee public offering.