Mumbai: Indian corporates raised Rs1.70 lakh crore through commercial papers (CPs) during the first half of the current fiscal. A total of 169 issuers raised this amount, which was down 15% from Rs 2.01 lakh crore raised by 184 issuers in comparable period of the previous fiscal, a report by Prime Database, the country's premier database on primary capital market, noted.
CPs are unsecured money market instruments issued to raise short-term funds with maturity period of less than one year. According to Pranav Haldea, MD, Prime, fund raising through CPs, which had witnessed a lot of buoyancy in the last two years, nearly dried up after RBI in mid-July raised the lending rates by 200 basis points (100 basis points = 1 percentage point) under the marginal standing facility, which is a penal lending rate.
"This had pushed up the short-term rates by more than 300 basis points, making it unviable for companies to borrow from the markets," Haldea said. The subsequent easing of short-term rates has again led to companies going to the CP market in place of higher-cost borrowings from banks, the report said. "Funds raised through CP, which were at Rs 36,702 crore in June but fell to Rs 29,520 crore in July and further to just Rs 7,652 crore in August, saw a reversal of trend in September with Rs 18,684 crore being raised," he said.
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