Indian cos likely to raise funds via public issues in 2023 as cash tightens-bankers

MUMBAI, Dec 29 (Reuters) - 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, bankers

and analysts said. Indian companies raised around 5.38 trillion rupees ($64.95

billion) through private placements in 2022, largely aided by

the banking system's massive cash surplus, data showed. Public issues were only to the tune of around 80 billion

rupees. "As rates are settling at higher levels, retail investors

would be keen to put funds in public issues," said Ajay

Manglunia, managing director and head of investment grade group

at JM Financial. "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." Corporates have traditionally preferred raising funds via

private placements due to its ease, shorter execution time, and

lower costs overall. However, with the Reserve Bank of India (RBI) 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, bankers said. Indian companies raised 127.1 billion rupees and 175.3

billion rupees through public issues in 2020 and 2021

respectively, SEBI data showed. Fundraising through private placement stood at 8 trillion

rupees and 6.31 trillion rupees respectively. 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, bankers said. RATES TO REMAIN ATTRACTIVE Bond markets were highly volatile in 2022, due to a

combination of the war in Ukraine, the U.S. Federal Reserve's

policy tightening, high inflation, and the RBI's rate hikes. The coming year, however, is expected to be less erratic

with yields remaining elevated, a positive for retail investors. Adani Enterprises and Indore Municipal Corporation

are set to make their first-ever public bond offering. Other non-banking finance companies like L&T Finance

Holdings, Indiabulls Housing Finance and

Muthoot Finance among others are lining up to tap the

market in January-March, merchant bankers said. Several non-banking financial companies and micro-finance

companies also prefer retail investments, which helps them

attract funding from development finance institutions and global

investors. "We're expecting one more issuance to happen before the

current financial year ends," said Oommen Mammen, chief

financial officer at Muthoot Finance. "Certainly, more companies will venture into public issue of

bonds in the next year." The RBI is largely expected to pause its current rate

tightening cycle after one more 25-bps increase in February, and

the markets have largely factored that in. "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.

($1 = 82.8300 Indian rupees)

(Editing by Swati Bhat and Janane Venkatraman)