Debt is dearer, equity is choosier. Here is how mid-market promoters are structuring hybrid raises without giving away the house.
Every promoter we meet these days opens with the same complaint: capital has become expensive in every direction. Banks are quoting spreads that would have been unthinkable three years ago, NBFCs are pricing risk aggressively, and equity investors - flush as they are - want deeper discounts and heavier rights than the market offered in the cheap-money era.
The instinct in this environment is to wait it out. In our experience, that is usually the most expensive decision of all. Growth opportunities do not pause because the rate cycle is unfriendly - a competitor recapitalises, a large order lands, a distressed asset comes up for sale. The promoters who win this cycle are the ones who redesign their capital structure instead of postponing it.
Stop thinking debt versus equity
The mid-market habit of treating fundraising as a binary choice - a term loan or a stake sale - leaves enormous value on the table. The most effective raises we have structured recently are hybrids: a smaller equity component to repair the balance sheet, layered with structured debt that prices below pure-risk lending because the equity cushion beneath it is now visible.
Sequencing matters as much as structure. Closing even a modest equity round first changes the conversation with every lender that follows. The same company, the same promoters, the same order book - but a materially better rating outcome and a spread that can drop by 150 to 250 basis points.
What lenders actually reward
Bankers do not price your business; they price their ability to defend the file. A crisp information memorandum, three years of clean audited financials, a monitorable cash-flow model and a credible use-of-funds statement routinely do more for pricing than another round of negotiation. Most mid-market borrowers lose pricing not on fundamentals but on presentation.
This is also where a success-fee advisor earns their keep. Because our fee is linked to the amount raised and the pricing achieved, the incentive to push for the last 50 basis points is ours as much as yours.
The promoter's checklist
Before you take a raise to market this year: clean up inter-company loans and promoter advances, resolve every open compliance notice, get your working-capital cycle audited independently, and decide your walk-away pricing before the first meeting - not during the last one. Companies that arrive prepared close in eight to ten weeks. Companies that prepare during the process take six months and pay for the delay in pricing.
Capital is never cheap or expensive in the abstract. It is cheap or expensive relative to how well the raise is engineered. Engineer it well.
Written by
Paramjeet Singh
Writing field notes on finance, tax, process and infrastructure - from the work, not about it.
