India Inc raises Rs40,500 crore via bonds in April-May

Companies are in need of capital and since the equity market is under pressure, they are raising money through bonds

Volatility in the equity market is making Indian companies go for the debt route to raise funds, as the companies raised a whopping Rs40,500 crore through private placement of bonds in the first two months of the current fiscal, a 43% jump over the year-ago period, reports PTI.

The companies, which are listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), have garnered Rs40,488.45 crore in April-May, 2010, through issuing 251 such bonds. Listed companies had raised Rs28,239 crore through issue of bonds in the same period last year, according to the data available with market regulator Securities and Exchange Board of India (SEBI).

"The fund raising activity among the companies is picking up as the markets are recovering from its last year lows. But, the equity markets are trading under pressure. The companies are in need of capital and bonds being a more secured options, they are raising money through these routes," SMC Capitals equity head Jagannadham Thunuguntla said.

Corporate bonds are long-term debt instruments issued by private companies to raise funds for expansion of business.

The firms have raised Rs16,514.18 crore through issuing 139 such bonds in April and the growth trend continued in May also with companies raising Rs23,974.27 crore through issuing 112 bonds.

In all, there were 251 issuance of privately placed corporate bonds during April-May, up from 123 in the same period of previous fiscal.

The BSE benchmark Sensex, during the period under review, fell by 583.14 points, or 3.32%, to settle at 16,944.63 points on May 31.

During the calendar year till May, the listed companies have raised a staggering Rs1.14 lakh crore by 681 bond issues, against Rs 91,772.46 crore through 390 bond issues during the same year-ago period.

Companies had raised over Rs2.12 lakh crore through corporate bonds in FY'10 compared to Rs1.73 lakh crore raised through corporate bonds during 2008-09.

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Direct tax mop-up jumps 15% in Q1 to Rs68,675 crore

The government has budgeted for a total tax collection of Rs7.46 lakh crore during this fiscal, of which Rs4.3 lakh crore is estimated from direct taxes

The collection of direct taxes during the first quarter of the current fiscal increased by over a full 15% to Rs68,675 crore, indicating higher corporate earnings, reports PTI.

The government has budgeted an overall tax mop-up of Rs7.46 lakh crore during this fiscal, out of which Rs4.3 lakh are expected to be realised from direct taxes.

Realisation of direct taxes, which mainly include corporate tax and income tax, went up to Rs68,675 crore, as against Rs59,465 crore in the same period last fiscal.

According to the figures released by the finance ministry in New Delhi today, corporate tax collection, which is a reflection on the performance of India Inc, soared 21.65% to Rs43,439 crore during the reporting period and thus contributing to the maximum during the reporting period.

But the realisation from personal income tax (I-T), securities transaction tax (STT), banking cash transactions tax etc grew marginally by only 1.24% to Rs24,075 crore during the April-June period.

However, the realisation from the securities transaction tax declined to Rs1,094 crore, from Rs1,462 crore during the first quarter of previous fiscal.

As regards advance tax, the first quarter witnessed the highest increase of 31.4% to Rs26,876 crore, up from Rs20,456 crore during the same period last fiscal.

While the advance tax collection dropped by 3.5% during 2008-09, it recorded an increase of 25.1% in the previous fiscal. The increase in advance tax collection was 30% in 2006-07 and 26.9% in 2005-06.

The government expects to mop up Rs4.3 lakh crore by way of direct taxes during the current fiscal, an increase of over 13% over the year-ago period.

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Economists expect another rate hike on 27th July

The consensus is that RBI will hike the repo and reverse repo rates by 25 basis points, but there is no expectation of an increase in CRR

Economists expect the Reserve Bank of India (RBI) to hike its key short-term lending and borrowing rates on 27th July to tame rising inflation, which is already in double-digits, reports PTI.

The opposition has mounted pressure on the government to rollback fuel prices and curb inflation, but economists said the RBI's expected move will not be guided by the National Democratic Alliance (NDA) and Left-sponsored Bharat Bandh yesterday.

They, in fact, favoured the government's move to hike petroleum prices.

"The idea is to moderate economic growth by raising interest rates and thereby control inflationary expectations.

I don't think that due to the protests by the opposition, RBI will be forced to hike its rates faster," Crisil chief economist D K Joshi said.

Axis Bank chief economist Saugata Bhattacharya also said, "Our sense is that there will be 25 basis points hike in both repo and reverse repo rates on July 27. They will not do anything to the cash reserve ratio (CRR). By that time, liquidity will be less restrictive... it would have eased significantly. So, they will not touch the CRR."

Economic think-tank ICRIER Director Rajiv Kumar said he expects the RBI to increase the repo (short-term lending) and reverse repo (borrowing) rates by another 25 basis points each in its July review.

"They will not be changing the CRR. The hike in rates will help to bring down inflation. Besides, inflation is expected to go down on base rate effect and good monsoon. We expect inflation to be 6.5% by March," he said.

The CRR is the proportion of deposits that banks are required to keep with the RBI in cash. Since liquidity in the system is tight, due to a more than Rs1 lakh crore outgo towards payment for spectrum for high speed mobile and broadband services, besides advance tax payment, the Reserve Bank may not hike the CRR.

The opposition NDA and the Left parties had yesterday organised a Bharat Bandh to press for a rollback of the hike in fuel prices and tame inflation.

The government had last month deregulated petrol prices and increased the rates for other fuels.

The central bank, in an unscheduled move last week, hiked the short-term lending and borrowing rates (repo and reverse repo) by 25 basis points each to 5.5% and 4%, respectively, to cool down inflation.

Even as food inflation sharply declined by almost four percentage points, it still stood at 12.92% during the third week of June. Overall inflation is already in double-digits, at 10.16% in May.

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