Flush with funds after the demonetisation move, Indian financial market is likely to give a breather to Indian firms, which are reeling under the burden of high interest cost in recent years.
The demonetisation move has seen deposits worth more than Rs 4 lakh crore entering the folds of formal banking system. This, in turn, has pulled down government bond yields by more than 40 basis points (0.4%), which are hovering around 6.61 percent (10-year benchmark) as of now.
Softening bond yields have offered an opportunity to Indian firms for raising money through bond sale as borrowing costs will be lower for companies. Around Rs 20,000 crore worth bond sales would hit the bond street in the coming days, reports suggested.
"From fund raising perspective, the boardroom level preparation by companies has already started as bond yields have fallen. Investment bankers are also getting enquiries," Sunil Goyal, managing director of Mumbai-based investment bank, Ladderup, told International Business Times, India.
He, however, added that the companies would wait for some more time and are likely to hit the market next month or early next year.
With a likely reduction of 0.5 percent in borrowing costs, many public sector firms, including the National Highway Authority of India (NHAI) and Indian Railways Finance Corporation (IRFC), among others, are likely to raise money in the near future.
Raising of capital through issuance of corporate bonds is a relatively cheaper alternative to bank loans. India Inc had raised around Rs 6 lakh crore in 2015 via bonds and stocks. Retail issuance of non-convertible debentures (NCDs) by Indian companies was at Rs 34,000 crore during the last financial year.
