Adani's Public Bond Success Masks Debt Market Reality

NBFCs dominate, only four non-financial groups issued public debt in last three fiscals

- Abirami Sekar & Anshika Kayastha

Adani Enterprises Ltd.'s ongoing public bond offer was fully subscribed within hours of opening, reflecting demand for such high-rated issues among retail buyers. Yet, it does not suggest an across-the-board surge in such issuances. Experts say non-bank lenders will continue to dominate this category.

Companies with low credit risk, usually rated 'A' or higher, raise money via bonds in two ways. A private placement open to select institutional or wealthy investors, which is the dominant mode of raising debt for Indian corporates. The other way is an initial public offering for all debt investors, a less preferred funding option.

Due to heavier funding requirements, non-banking financial companies (NBFCs) are more frequent issuers of public debt. To diversify their lending pools in accordance with regulatory guidance, NBFCs look at various avenues of funding, including bank loans, equity capital, overseas borrowing, privately placed non-convertible debentures, secured or unsecured debt, and subordinated debt.