Public financial institutions (PFIs) were the biggest borrowers, raising a total of Rs.13,110 crore. Meanwhile, borrowings by state level undertakings (SLUs) more than doubled to Rs.9,407 crore. SLU borrowing had seen a consistent fall in the preceding two years but FY 04 saw increased expenditure in infrastructure and power sectors. PSU borrowing dipped by more 50 percent to
Rs.6,656 crore while Banks and financial institutions borrowed a total of Rs.10,128 crore.
Cost of the borrowing for a top rated 10-year corporate paper fell by 150-200 basis points (bps.) in FY 04, aided by liquidity and improved economic scenario. However, the two positive factors for the market viz., lower yields and liquidity, were overshadowed by regulatory concerns and relaxation in the ECB norms.
Debt mobilisation slipped 47% in Q3 over Q2, when the SEBI and the RBI clamped down on the market by issuing listing and exposure criteria for borrowers and investors (read Banks). The deadlines to meet the norms were eased later and increased primary issuance but could not do enough to trigger a sharp reversal of the trend. By then, companies had found the external commercial borrowing (ECB) route as a cheaper alternative to raise money. As compared with the AAA 5-year yield of 5.55-5.65% , a fully hedged ECB cost around 5% or lesser for few highly rated Indian corporates.
The securitisation market grew quite actively in the fiscal with around Rs.8,115 crore worth of loans/assets securitised as FIs found securitisation a good way to meet CAR norms. Interestingly Banks and FIs securitised the assets such as corporate loans and microfinance for the first time.
Another highlight was the issue of rupee debt by a supranational Bank in the Indian market. The Asian Development Bank raised Rs.500 crore via 10-year at a spread of 16 bps. over the sovereign yield of similar maturity.
Debt mobilisation did pick up towards the end of the fiscal but with the instruments like FCCBs in good demand, the domestic corporate debt market could remain subdued. However the creation of Rs.50,000 crore infrastructure fund is expected to support the market.