The liquidity crisis has top Indian companies going back to the good old ways of raising fund—taking fixed deposits and pledging shares. Apparently, companies have realised that those who garner funds at the best rates are the ones with the best chance to survive.

With the equity market virtually shut for new issues and banks reluctant to lend to the corporate sector, companies have little option but to turn to debt placement. The rush to explore other means has been so sharp that by the end of this financial year, corporate India will have doubled its debt placement from the year before.

According to data sourced from Prime Database, in 2007-08, companies raised Rs 1,77,000 crore through 1,433 debt issues. Preliminary estimates show a similar amount had already been raised in the current fiscal to fund capacity expansion plans and even manage working capital.

Tata Motors, the country’s second largest vehicle maker, has announced a fixed deposit plan that offers 10% interest for one-year deposits, with senior citizens getting 0.5% more. The company’s board has approved raising up to Rs 1,931.5 crore from the public through this route.

Already around 150 issuances have been announced in this fiscal and more companies are expected to sign on. Company fixed deposits went out of favour in the early 1990s as the Indian stock markets boomed.

“The cost of funds for any decent company would be around 14 to 18% now while fixed deposits can be raised for around 12.5%. So they are attractive,” says Mandar Gupte, CFO with a multinational company.

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