India Inc raises Rs 1.4-lakh crore via equities in 2017

Fundraising through the equity route hit an all-time high, touching the Rs 1.4-lakh crore mark during the current calendar year (CY17). In all, companies raised a record Rs 1,40,073 crore in the ten-and-a-half months of CY17 (January – November 14, 2017) through various equity instruments. 
 

This includes initial public offerings (IPOs), follow-on offers (FPOs), offer for sale (OFS), rights issues, and institutional placement programmes (IPPs), including qualified institutional placements (QIP).

The amount is more than double when compared with the entire previous calendar year (CY16), when companies raised Rs 46,733 crore. Earlier in CY10, they had raised Rs 1,04,462 crore (or Rs 1.04-lakh crore) via equities, data from Prime Database shows. Analysts attribute this to the buoyant secondary market that has seen the benchmark indices — the S&P BSE Sensex and the Nifty 50 — rally 25 per cent thus far in CY17.

“Promoters are making use of the bull run in the secondary market to raise funds. Valuations for a lot of mid-cap companies have improved over time, and promoters are using this opportunity to tap the market for funds, including microfinance companies, non-banking financial companies (NBFCs) and private banks,” said G Chokkalingam, founder & managing director, Equinomics Research.

 

Among sectors, financials including banks, non-banking financial companies (NBFCs) and insurance firms have cornered more than half the share, or about Rs 85,000 crore, of the total fundraising thus far in CY17. The companies from the sectors such as power generation & distribution, consumer durables, metals, realty, retail and pharmaceuticals raised more than Rs 1,500 crore. Going ahead, while analysts expect India Inc to continue raising funds, but not at the scorching pace seen in CY17. One of the factors, they say, are the mega-issues of insurance companies which are now out of the way.

“The pace of equity issuance in the next year is likely to slow and could be around the Rs 1-lakh crore mark. CY17 saw a large number of IPOs, especially from the insurance sector. These were being planned since quite some time and hit the market only in CY17. I don’t think we will see this kind of a paper supply from insurance companies next year. As a result, the overall equity issuance is likely to dip going ahead,” said Mahesh Nandurkar, executive director and India Strategist at CLSA. That apart, there are concerns regarding the pace of the rally in the secondary market in the absence of a meaningful recovery in corporate earnings. Experts do not expect similar returns from the markets in CY18 as seen in CY17, as politics (Assembly elections), actions of global central banks, corporate earnings and oil prices take centre stage.

 

“Market’s focus will now shift to the outcome of state elections and the overall fiscal health of the country in the next one year. Besides, oil prices are on a rise. All these should keep a check on the sentiment, and may have a rub-off effect on fundraising,” Chokkalingam said.

Banks/NBFCs, however, may continue to tap markets for funds. With the economic cycle likely to witness an upturn going ahead, analysts expect more companies, especially from this segment, to tap the primary market. This, they feel, will also be led by the need for capital for expansion purposes. “As the country prepares for the general elections in 2019, I will not be at all surprised to see a surge of IPOs by private companies in the next few months before the deal window closes. From a sector perspective, financials, industrials and health care have been some of the busiest sectors in terms of domestic listing. We can expect to see strong activity in these sectors in the next 18 months,” said Ashok Lalwani, head of Baker McKenzie’s Global India Practice.