The Process of Debt Syndication and Its Need in India

Debt syndication is a process that is put in place when a borrower requires a sum of money that is too large to be provided by a single lender, or outside the scope of the lender’s risk-exposure level, funds are agglomerated from several lenders. Debt syndication can come in a handful in running your business. Find out how.

What is Debt Syndication?

Debt syndication is initiated with a group of lenders coming forward for funding various portions of a loan to a single borrower. Since this is a structured product with multiple people in the reckoning, there is a need to have an effective administration. To do so, the third-party accounting and associates are involved to oversee the operations. It is imperative to hire an accounting associate which has high credibility in the market along with several important connections with various lending parties to provide some excellent financing solutions. (Read More: Why Should You Trust Your Chartered Accountant?)

Not too long ago, the debt syndication was used by Fortune 500 companies that required large amounts of funds for their projects. Now, with the rise of SMEs and large corporations, the demand for syndicated loans has gone higher. The major industries which seek debt syndication are power plants, steel plants, refineries. The process of debt syndication is even sought to fund takeovers, mergers, and acquisitions. There is a multifield rise in small and big businesses. Add to that the start-up wave due to which the requirement for funds is only likely to grow and debt syndication in India may offer a viable financing alternative to companies.

The Need for Debt Syndication in India

There was a time when the Indian companies lacked the options for raising capital as the debt market in the country wasn’t so developed. But in present times the Indian market could use additional financing solutions for the financial leverage which is a requisite for a business operation to flourish. Historically, India has a less developed equity market than usual. In terms of practicality, the equity route is indeed viable, but it provides the investor with a claim to the business and dilutes the ownership interest of the founders. It is for this reason alone that many company owners choose to retain their claim to ownership of the business and restrain themselves from seeking equity funds. (Read More: The Significance of Payroll and Attendance Management Software)

As mentioned earlier, debt syndication has been instrumental in bridging the gap between equity markets and debt markets in India. This growth in the availability of syndicated loans has given the owners the cushion of alternative methods to raise funds for their companies without having to dilute their ownership. The future course of these loans in terms of availability is likely to rise based on the trends of other countries like Japan, Korea, and the USA who have developed debt markets. Furthermore, the debt syndication comes as a huge relief from the botheration of meeting and coordinating with multiple individual lenders in case of these loans. The increase in the availability of syndicated loans shall only pave way for many corporate and entrepreneurs plying in the market today and can successfully address their issue of respective businesses by way of structured products.

To put things into perspective again, the debt syndication can give impetus to project finance, working capital finance, acquisition funding, promoter funding, mezzanine funding, overseas funding to name a few.

Over the years, we have built a robust network in structuring appropriate financing solutions which are most relevant to the client requirements and by identifying the appropriate institutional investors. In addition, there is always the availability of our professional consultation supported by a real understanding of the problems faced by the businesses.

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Created on Oct 21st 2021 02:42. Viewed 270 times.

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