Indian companies are learning to skip the customary road shows before raising funds in the foreign markets.
In calendar year 2012, companies such as NTPC, Indian Overseas Bank and IDBI Bank sold foreign currency bonds to global investors without road shows.
“Indian issuers have been active in the overseas bond market in the past couple of years. Many of them have issued foreign currency bonds that are trading in the secondary market. Global investors are aware of their brands and businesses. For them, it is no longer necessary to hold a road show before launching a new issue,” says a senior banker with a large European bank in India.
Instead of road shows, merchant bankers are arranging video conferences with the issuer in case an investor wants to interact with the management before subscribing to the issue.
“There is certainly a de-linkage happening between the road shows and actual transactions. A bank may do a road show in March, but the issue will probably happen six months down the line, when they find the pricing attractive. It depends on how well you know the investors, are they familiar with your brand and businesses, etc,” says another banker.
The trend is gaining popularity as global investors are now more familiar with Indian businesses. Many of these companies have raised funds abroad in the recent past. The importance of road shows is also declining as Indian firms have become savvier and are prepared to launch an issue even at a day’s notice.
“We announce in the morning, say around 6 am IST, that we are intending to do a transaction and we give a price range. Then, post lunch time in Hong Kong, we give the price guidance. By the time European markets close, we go firm with the pricing and when the US market opens, we are ready with our final offer,” says a senior banker with a large foreign bank, explaining the speed at which some of the recent issues were launched.
Most merchant bankers, however, feel road shows are unlikely to be phased out completely. “I don’t think road shows can be phased out. Investors have the right to know where they are investing their money and for what purpose it is being used. For that, road shows are needed. But it is not needed every time you go out in the market,” says a banker who heads the debt capital market business of a foreign bank.