Mumbai, June 20: Corporate giants like Reliance, Grasim and Larsen & Toubro have began taking advantage of the new credit policy announced this April. Most of them alongwith PSUs have already tapped the private debt market and raised around Rs 4,000 crore during the first quarter of the current financial year ending June 30, 1997.

The rush by corporates followed the removal of the five per cent investment limit for corporate bonds for the banks. Also, the low interest rates is a major draw.

Last fiscal, an estimated Rs 19,000 crore-plus was said to have been mopped up through the private placement market. If the amount of the first quarter is extrapolated for a full year, then this year could corporates garner Rs 16,000 crore says investment banking sources.

The percentage of corporates to PSUs that tapped this route for cheap funds, has risen to around 60 per cent from under 40 per cent in the previous year. While the time factor for raising the needed funds was one of the main reason, the five per cent saving on issue management expenses was also a motivating factor.

Top rated--AA+ (double A plus) and above--corporates have been successful in raising funds through this route. Given the current trend, a similar amount could possibly be raised in the next quarter, sources in the debt markets feel.

Before the credit policy the banks were constrained in investing in privately placed corporate debt through the five per cent limit. Also, the PSUs were considered to be more safer than corporate debt. However, with the removal of the five per cent limit the institutional investors seem to be lapping up the AAA (triple A) rated paper.

The low interest rate climate after the last credit policy lured some of the top corporates to the domestic market for raising cheap debt funds. For instance, Reliance which usually prefers the ECB market more than the domestic, raised around Rs 200 crore through the private placement route. Similarly, Reliance Capital raised around Rs 150 crore.

At least 10 top corporates have raised Rs 100 crore each through this route. Some of them were: Larsen & Toubro (Rs 150 crore), Indo Gulf (Rs 100 crore), ACC, Mahindra & Mahindra and Grasim (Rs 100 crore each). Tata Sons raised over Rs 60 crore, Nestle (Rs 50 crore), Nicholas Piramal (Rs 50 crore. Even companies like Leela Venture, Gujarat Alkalies & Chemicals, Countrywide Finance were seekers of cheap debt funds.

From among PSUs that raised funds through private placement market, were Industrial Development Bank of India (Rs 500 crore), Krishna Bhagya Jala Nigam (Rs 400 crore), Indian Railway Finance Corporation (Rs 300 crore), Steel Authority of India Ltd (Rs 300 crore), Sardar Sarovar Nigam Ltd (Rs 270 crore) and Karnataka State Finance Corporation (Rs 80 crore).

Indian Petrochemical Corporation Ltd (IPCL) is currently experimenting with a novel concept of raising over Rs 150 crore through a coupon to be decided, for the first time, through a book-building process. June 24 is the last date for receiving bids.

With the low interest rate climate likely to continue at least till the busy season sets in from October, an equal amount of debt paper is further likely to be placed during the next quarter.

The non-food credit offtake from the banks, which has been languishing since the past one year, is most likely to pick up after October, sources from the debt market say. This is likely to reduce the prospects for private placements with the banks, sources say.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.