Fundraise by co rated 'D' a sign of junk bond market breaking free
debt markets appear to have come of age, with companies that defaulted on repayment deadlines still able to face potential investors and raise funds, promising a turnaround in their fortunes. Recently, a real estate company with a D rating (indicating default) raised ₹95 crore from the private placement bond market — sending early signs of the evolution of the junk bond market in India.
Mumbai-based Damji Shamji Realty raised ₹95 crore from the bond market in mid-December despite being assigned a D rating by India Ratings and Research, according to a stock exchange disclosure.
ASK Real Estate Special Opportunities Fund IV was the sole investor, a senior company official confirmed.
Damji Shamji Realty defaulted on HDFC Bank's loan in April 2022, prompting the rating company to assign a D rating, the people said.
The real estate-focused special situation fund charged a 22% internal rate of return for the three-year debt facility. The proceeds from the borrowing will be used to repay ₹70 crore HDFC Bank's loan and ₹25 crore is the working capital for completing the existing project in hand.
«Our investment from the newly closed debt fund will support their residential project, Mahavir Kalpavruksha on Ghodbunder Road, Thane,» said Bhavin Jain, chief investment officer, ASK Property Fund.
«This was the last mile funding opportunity where the existing lender was refinanced and additional working capital was provided for project completion.»
Damji Shamji did not respond to ET's request for comments.
The fundraising is rare given that the company has issued a rated, secured and listed bond.
Due to internal policies, none of the banks, insurance companies or mutual funds invest in D-rated companies, which often struggle
