MUMBAI, May 31: Companies are vying with each other to tap the debt market for funds. Leading companies have already raised funds and others are queueing up with private placement of non-convertible debentures or bonds following the drop in interest rates.

All the major industrial groups — the Tatas, the Aditya Birla group, Reliance, Larsen amp; Toubro and Thapar — are in the fray. Tats Sons had last week raised Rs 50 crore through a debt issue which carried an interest rate of 14.75 . Reliance Capital received a subscription of Rs 500 crore for its 14.50 . Rs 100 crore non-convertible debenture issue. The company is expected to retain Rs 300 crore.

Cement giant ACC had tapped the debt market with a Rs 100 crore issue carrying a coupon of 14.50 . The other debt issues raised or in the pipeline include Nestle Rs 50 crore, Ashok Leyland Finance Rs 25 crore, Ballarpur Industries BILT of the Thapar group Rs 40 crore, Indo Gulf Fertiliser of the Aditya Birla group Rs 100 crore, Grasim Industries Rs 50 crore, IRFC Rs 250 crore, Mahindra amp; Mahindra Rs 100 crore, Kerala State Financial Corporation Rs 50 crore, Gujarat Alkalies amp; Chemicals Rs 30 crore and IDBI Rs 1000 crore.

The mega issues include Indian Petrochemical Corporation Rs 450 crore, Bharat Heavy Electricals Ltd Rs 1,000 crore, BPCL Rs 640 crore, HPCL Rs 600 crore, Sanghi Industries Rs 258 crore, National Housing Bank Rs 500 crore, Exim Bank Rs 300 crore, TVS-Suzuki Rs 100 crore, Wockardt Rs 100 crore, Binani Industries Rs 100 crore and Indian Oil.

Also, several municipal corporations like Pune, Ahmedabad, Surat and Hyderabad had firmed up plans for private placement of bonds. Merchant bankers said around 100 firms are likely to tap the private placement route to raise over Rs 15,000 crore. “Only reputed firms can use this route.

Companies will have to get a credit rating before placing their debt instruments. A shady company cannot float private placement with investors who invest in bulk,” said a merchant banker.

Many of the companies who are making private placement of debt instruments had earlier planned public issue of equity shares. As the primary market is in bad shape, they are in no shape to raise the money for expansion and diversification. The drop in interest rates in the last three months had come in as additional bonanza for issuers. Further, companies don’t require SEBI nod for making private placements.

In fact, most of the debt issues carry a coupon rate of 14.25-15.50 . As a result, IDBI’s move to privately place Rs 1,000 crore bonds at a coupon rate of 13.50 has evoked only lukewarm response. “This shows that investors are not ready to mop up instruments at lower interest rates,” market sources said.

Merchant bankers fear that the overcrowding of the debt market will lead to a rise in interest rates in the next a few months. In the meantime more and more companies are coming forward to raise funds when the coupon rates are at a lower level.