CP issuances are still not as high as 2018 levels when they touched Rs 3.1 lakh crore in July-September, as NBFCs look for other funding avenues like securitisation, where volumes peaked in FY24 at Rs 1.9 lakh crore. CPs are short-term, unsecured debt instruments issued by corporates.
While banks remain the major source of funding, NBFCs will look to diversify their funding source. “The share of CPs is expected to rise over the medium term from the low of 4% in FY20-23, but will remain lower than the pre-pandemic high of 11%,” said Malvika Bhotika, director, Crisil Ratings.
Even though the share of CPs is increasing in overall funding, it is not worrisome yet. This is because NBFCs backed by respective parents have almost 80% of the CP volume. Furthermore, issuances are backed by shorter tenure assets, and the share of longer term – 9 to 12 month – issuances have increased to 25% from 8% in September 2019 and companies are maintaining higher liquidity coverage ratio with medians being at 155% as of December 2023, said Crisil.