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With a stable, seemingly pro-business government at the Centre, a resurgent corporate India is on a fund-raising spree, aiming to raise up to Rs 120,000 crore in the next two years, of which about Rs 71,000 crore will be raised in the next six months, say investment bankers, who are seeing a boom of sorts after five years of slowdown.
Companies are raising funds through dollar bonds and euro bonds, apart from launching offers for sale (OFS), qualified institutional placements (QIPs) and selling stake to investors in India and abroad. "This is one of the biggest fund-raising exercises, making companies like ours to hire more," says Motilal Oswal, chairman of Motilal Oswal Financial Services. "This (the new government) has given the confidence to Indian companies to go ahead and raise funds for projects in India."
Foreign investors are waiting to participate in the action, and Indian companies are making the most of it. For instance, auto parts maker Motherson Sumi is marketing its Rs 3,000-crore Euro bonds to investors, while Vedanta is seeing a good response to its Rs 3,000-crore dollar bond issue.
Not only debt, equity is also in demand from investors. On Tuesday, L&T IDPL sold stake to Canadian Pension Plan Fund for Rs 1,000 crore. The fund has agreed to buy additional stake for Rs 1,000 crore later. On Tuesday, the Anil Ambani-led Reliance Communications raised Rs 3,000 crore by selling new shares to qualified institutional investors.
The Centre is making the most of the bull run to sell stake in Hindustan Zinc, following the Securities and Exchange Board of India allowing non-promoter shareholders to offer shares through the OFS route. The sale of government stake will fetch about Rs 20,000 crore. An OFS for Steel Authority of India Ltd is expected to follow.
Analysts say as of now, 21 public sector undertakings, among the BSE 500 companies, have free-float of less than 25 per cent. At current market prices, the market capitalisation of the stake to be sold to meet norms will be $9.6 billion, through three years. Of this, Coal India will account for 63 per cent, or Rs 36,000 crore.
"I expect in the next two years, Indian capital markets will see equity fund raising of $15-20 billion," says Bharat Banka, managing director and chief executive of Aditya Birla Private Equity. "Additionally, the strategic interest of global players will rise considerably and allow private equity investors to get strategic or control premia for their investments," he said.
Deal Street buzzing
Bankers say the deal front is buzzing with activity, with companies planning to either go for acquisitions or sell stake. The Birlas are in talks with Jaypee to buy out Jaypee's cement plant in Rewa in central India, at a valuation of $1.2 billion. Though the Birlas declined to comment, insiders say the group is conducting due diligence on a few Holcim-Lafarge plants in India, which the latter wants to sell after their merger in Europe. The Tatas are also raising Rs 7,200 crore to buy back 26.5 per cent stake in Tata Teleservices from Japan's NTT DoCoMo by this month-end.
Public sector companies have also caught the M&A. A team of International Coal Ventures Ltd, a venture owned by SAIL, Coal India, NMDC and NTPC, is in Mozambique to buy a coking coal mine from Rio Tinto for about $250 million (Rs 1,500 crore).
