Definition of 'Private Placement' The sale of securities to a relatively small number of select investors as a way of raising capital.

Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market. Explains 'Private Placement' Since a private placement is offered to a few, select individuals, the placement does not have to be registered with the Securities and Exchange Commission. In many cases, detailed financial information is not disclosed and a the need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor is only made aware of the placement after it has occurred.

Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of [1] chosen investors. "Private placement" usually refers to non-public offering of shares in a public company (since, of course, any offering of shares in a private company is and can only be a private offering). PIPE (private investment in public equity) deals are one type of private placement. In the United States, although these placements are subject to the Securities Act of 1933, the securities offered do not have to be registered with the Securities and Exchange Commission if the issuance of the securities conforms to an exemption from registrations as set forth in the Securities Act of 1933 and SEC rules promulgated thereunder. Most private placements are offered under the Rules known as Regulation [2] D. Private placements may typically consist of offers of common stock or preferred stock or other forms of membership interests, warrantsor promissory notes (including convertible promissory notes), bonds, and purchasers are often institutional investors such as banks,insurance companies or pension funds.

Private Placement of Debt

Private Placement is a way of raising capital through an offer for subscribing to securities by a select investor class such as banks, mutual funds, insurance companies and pension funds. Since here the securities are not made available for subscription to public at large in the open market but only to select specific investors, it is known as private placement. AK Capital is one of the leading arrangers of funds in the debt market through private placement and as lead arranger have structured and managed many private placement issues for Indias leading Corporate Houses, Commercial Banks, Financial Institutions, Central Government, State Government Institutions and Ventures Capital Funds etc. Since 2002-03, AK Capital has been consistently ranked No.1 arranger of debt through private placement. AK Capitals performance in Debt market: Financial Year 2011-12 2009-10 2008-09 2007-08 2006-07 AK Capital Participation In INR (Rs. in Millions) 534,660 481,700 447,533 165,282 174,829 Market Share (percentage) 31.10 28.10 32.60 17.20 22.20 (Source: PRIME Database)

Private placements of debt has the following three types of instruments prevalent in India: Non-Convertible Debenture (NCD): Debentures usually are borrowings by Companies. Non-Convertible Debentures do not have the provision to be converted into equity shares of the issuing company. They are also known to earn higher coupon rate as compared to convertible debentures. Commercial Paper: Commercial Papers are promissory notes which usually have a fixed date of maturity, ranging between 7 to 364 days. They are usually money market security issued and are sold by arrangers of firms to raise capital and meet short term debt. Securitisation: Securitisation is a process of transforming an illiquid asset or a group of assets into security through financial engineering. Mortgage backed security is an example of securitization.

Some of the milestone accomplishments are: Structured and managed the first perpetual NCD issue from a NBFC - Magma Fincorp Ltd. as a Sole Arranger.

Managed amongst the first uniquely structured unsecured bond offering for AAA rated company Great Eastern Shipping Company Ltd. for INR 2,500 million. Served the largest Bank on Indian land State Bank of India as Lead Arranger to its INR 10,000 million Perpetual Bond Issue. Associated as Book Running Lead Arranger to the mega INR 20,000 million Bond Issue float of Indian Oil Corporation Ltd. Managed mega INR 25,980 million, INR 15,037 million and INR 20,170 million bond issues of Power Finance Corporation Ltd. Associated with the placement of largest ever tax free bond issue in India aggregating INR 100,000 million from India Infrastructure Finance Company Ltd. Managed the 1st ever Issue of Optionally Fully Convertible Debentures backed with guarantee from Power Finance Corporation Ltd. aggregating INR 4,000 million for Shree Maheshwar Hydel Power Corporation Ltd. Managed 1st Perpetual Bond Issue in India for UCO Bank aggregating INR 1,500 million. The deal was reckoned as Bond Deal of the Year 2006 by IFR Asia. Managed Buy-Back of Bonds by Punjab Infrastructure Development Board (PIDB) (a Govt. of Punjab Undertaking) First ever Buy-Back of Bonds undertaking by any SLU. Managed maiden INR 10,000 million Government of India guaranteed bond issue of Food Corporation of India which mobilized INR 92,235 million in just one day a record in the history of Indian Private Placement markets. Managed Tax-Free Bond Issue of Sardar Sarovar Narmada Nigam Ltd. (SSNNL) (a Govt. of Gujarat Undertaking) First Ever Tax-Free Bond Offering by any SLU. Managed Bond Issue of 6.70% Karnataka Neeravari Nigam Ltd. (KNNL) (a Govt. of Karnataka Undertaking) Then the Lowest ever coupon rate offered by any SLU. Managed Bond Issue of Gujarat Electricity Board (GEB) (a Govt. of Gujarat Undertaking) without any State Government Guarantee First Ever Bond Offering by any SLU without any recourse to the State Government. Managed maiden Bond Issue of Tamil Nadu Industrial Development Corporation Ltd. (TIDCO) (a Govt. of Tamil Nadu Undertaking) - Bond Issue fully subscribed within 2 weeks of its opening. Fastest ever mobilization in any State Level Undertaking (SLU) Bond Issue.

India Inc's private placement of debt increases

BS Reporter / Mumbai Mar 14, 2012, 00:29 IST
Ads by Google

Long Term BlueChip Stocks : Exclusive List of Indian BlueChip Stocks. Get it Free. Act Now!
Equitymaster.com/BlueChip-Stocks

India Inc raised Rs 1.64 lakh crore through private placement of debt in the first nine months of the current financial year, five per cent higher than in the year-ago period. According to research agency Prime, banks and financial institutions were at the forefront, in terms of tapping funds through private placement of bonds. Private placement pertains to the sale of securities to a relatively small number of investors, usually select and large, to raise capital.

Also Read
Related Stories News Now

- India Inc urges RBI to cut repo

rate

- India Inc worried over reforms

stalling post poll reversals

- India Inc invests $2 bn overseas

in Feb

- 30% large cos will block social

media access by 2014

- India ranked 30th for women - ONGC stock sprints ahead of

mega auction

presence on companies' boards

Banks and financial institutions saw an increase of 17 per cent in debt placement. The biggest mobilisation was by the category of all-India financial institutions/banks at Rs 1.1 lakh crore, Prime said in a release. This compared to

Rs 93,819 crore in the corresponding period of the previous year, it added. While mobilisation of funds through private debt placement by public sector undertakings rose significantly, the private sector saw a downward trend. Prime chairman and managing director Prithvi Haldea said, Mobilisation by public sector units rose 33 per cent to Rs 15,768 crore, compared with Rs 11,845 crore in the corresponding period of the previous year. The private sector saw a 27 per cent fall in mobilisation at Rs 35,422 crore, compared with Rs 48,617 crore in the year-ago period. Power Finance Corporation, Housing Development Finance Corporation, Rural Electrification Corporation, Infrastructure Development Finance Company and Air India had mobilised funds through private placement of bonds

India Inc prefers private placement to public issue of debt

SHARE COMMENT PRINT T+

BL RESEARCH BUREAU: Public issues of debt have gained traction with Indian corporates over the past four years, but private placement remains a more favoured route for raising funds. Private placement of debt totalled Rs 865,983 crore during the 2008-09 to 2011-12 period, whereas public issues of debt added up to just Rs 49,062 crore. The Indian bond market is small compared with other Asian countries, with the lack of liquidity being the biggest constraint. The situation seemed to have improved in 2011-12, with a sharp rise in the number of public debt issues in comparison to previous years, likely because companies were finding it difficult to raise funds from other sources. There were 20 public debt issues in 2011-12, which raised Rs 35,611 crore, in comparison to 14 debt issues over the previous three years that managed to raise just Rs 13,451 crore. This was a 276.8 per cent rise in the value of trading in comparison to the previous year. But private placement was even higher. While Rs 1,89,803 crore of private debt placement was reported to the NSE in 2011-12, private placement totalling Rs 56,974 crore was reported to the BSE.

This was an over two-fold rise on the NSE and nearly five times higher on the BSE in comparison to 2007-08 levels.
MARKET LACKS DEPTH

What is more, in the first three months of the 2012-13 financial year, private placement of debt worth Rs 73,759 crore was reported to the stock exchanges, whereas not even a single public debt issue took place. This has resulted in muted trading in the corporate debt market in terms of volumes and value in comparison to equities segment, with most investors abstaining from the market as it lacks sufficient depth. The market depth is further hampered by the fact that investors like to play it safe, with appetite restricted to top-rated companies.
HEALTHY TRADING

Nevertheless, the CDM segment has still managed to register significant growth. From 22,730 trades worth Rs 1,48,360 crore in 2008-09, there has been a 126 per cent rise in terms of volume and a three-fold rise in the value of trading to 51,533 trades worth Rs 5,93,783 crore in 2011-12. Trading was also healthy in the first quarter of FY2012-13, with 15,095 trades worth Rs 1,51,326 crore, surpassing the value of trades in 2008-09 already. arvind.jayaram@thehindu.co.in