In India, the debt market is several times smaller than the equity market, while elsewhere it is just a multiple of the latter. One of the complex tools that have helped lessen this gap over the years is debt syndication. Be it SMEs, mid-corporates or large corporates, all those looking for customized financing solutions for capital intensive projects opt for it.
Debt syndication is not only beneficial for the borrowers, who get the required money for their working capital and growth finance needs, but also for the lenders and other people involved. The biggest benefit for the lenders is that the risk gets spread out across the board. On the other hand, it saves time and effort of borrowers as they only need to meet the arranging bank or the key agent and not every individual lender. Besides, the diversification of loan terms and types of interest makes it flexible for the borrowers. They can even opt for different currencies as this protects them against inflation, changes in government laws or policies by RBI and other external factors.
Positive reputation reinforcement is another advantage of borrowing through debt syndication. Anybody that has paid syndicated loan successfully in the past automatically garners a good image in the market. In addition, it helps borrowers in networking and making new contacts with the group of lenders and not just the key lender; thus, increasing their visibility in the market. All these and more have made debt syndication a sensible choice for businesses.
In the last one year, around 49.5% of the investment banking revenues were contributed by debt syndication. 2 years ago, in the month of August in the year 2016, a committee that was headed by former RBI Deputy Governor, Mr. H R Khan made some recommendations for the Indian debt market, which included some changes in the policies, regulations, market infrastructure, as well as innovation as the prerequisite towards its deepening. With all these recommendations to be implemented, the impact began to show: between the month of March 2016 and the year 2018, wherein, corporate bonds outstanding had risen to around 1.36 times. If we talk of liquidity, then on average, the daily trading has nearly doubled in the last 5 years or so, with an exception to the CDs (the certificates of deposit), where it is decreased due to low supply. Growth fuelled by a cycle of decreasing interest rate and also due to demonetization; it led to a liquidity-surfeit. However, still we have many miles to go if we talk of the footprint on our Indian economy. Structurally speaking, the domestic debt market still firmly remains skewed towards the G-secs (the Government securities). If our country has to have a rapid economic growth in the long run, which is, in fact, an absolute societal necessity, then the corporate bond market is to play a very pivotal role as the major funding source. As per the CRISIL report, over the 5 fiscals through the year 2023, it is expected that the corporate-bond outstanding to over double to Rs. 55 lakh to 60 lakh crore, as compared with to 27 lakh crore rupees at the end of the fiscal year 2018 largely driven by big infrastructural investment needs, growth of most of the non-banking financial institutions, the regulatory force that will push, and the inability of our banks for cranking up corporate lending due to the capital constraints. We need a slew of some mandatory measures for bridging this gap, and for ensuring a healthy dynamics of demand & supply. Though the reforms that have been done thus far are progressive in nature, still we need much more of it, and also need some more fine-tuning.
There are various financial tools in India that help entrepreneurs, corporates, and investors meet their monetary needs. Debt syndication is one such financial solution that provides funds to keep the business running. It’s widely known that an organized fund flow system is crucial for running the business successfully. However, arranging for the same is not that easy, and businesses often need an expert like Resurgent India to manage this daunting task. Resurgent India Limited is one of the renowned names in the debt syndication market that helps SMEs, mid-corporate, and large corporate clients in India and abroad by providing them customized finance solutions. With over three decades of experience, it has the requisite expertise and knowledge of debt syndication and thus helps arrange debt at competitive rates.