Economic Survey 2023: Retail investors a tough crowd for debt issuance

Hawking debt securities to the retail market seems to have become difficult in the current financial year as public issues of corporate bonds dropped by 27 percent, the Economic Survey tabled in Parliament on January 31 said.

The survey pointed out that during the April-November period of FY23, public issuance of debt securities decreased even as private placements showed a growth of 10 percent compared to the corresponding period in FY22. Overall, issuances of debt securities showed a growth of 5 percent during the said period.

As a percentage of total issuances, public debt issuances were a mere 1.3 percent for the first eight months of FY23. This ratio was 1.65 percent for the corresponding period in FY22, data from the economic survey shows.

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To be sure, India corporate bond market is essentially driven by private placements where companies seeking funds approach potential investors in the primary private market rather than go the public issue route. According to data from the Securities Exchange Board of India (SEBI), the share of public issues in total debt securities issued during a fiscal year has continued to be in low single digits for many years now.

SEBI has relaxed rules for public issuance of debt securities over the years which has helped companies raise money from the retail investor.

Despite this, the capital markets regulator’s data shows that public issuance of debt securities has seen a fall over the years.

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In FY12, companies raised Rs 35,610 crore through public issue of bonds. In FY22, this dropped to Rs 11,589 crore. It further dropped to Rs 6,624 crore in the April-November period of FY23. The number of issues floated for retail investors has remained largely stable at around 20.

Getting retail money has been tough in the last two-three years owing to the sharp fall in bond yields and interest rate as the Reserve Bank of India slashed policy rates to combat the ill effects of the coronavirus pandemic.

While easing of rules may make it easy for companies to raise money from the retail market, getting the average Indian to buy bonds is still a challenge. What matter to the retail investor is the nominal return on the debt security which has been low in the past two-three years.