India Inc raises Rs 1.4-lakh crore via equities in CY17

Fund raising through the equity route hit an all-time high, touching Rs 1.4-lakh crore mark during the current calendar year 2017 (CY17). In all, companies raised a record Rs 140,073 crore in the 10-and-half months of CY17 (January - November 14, 2017) through various equity instruments.

This includes initial public offers (IPO), follow-on offers (FPO), offer for sale (OFS), rights issues, institutional placement programme (IPP) including qualified institutional placements (QIP).

The amount is more than double as compared to the entire previous calendar year 2016 (CY16), when companies raised Rs 46,733 crore. Earlier in CY10, they had raised Rs 104,462 crore (Rs 1.04-lakh crore) via equities, the data from PRIME Database show.

Analysts attribute this to the buoyant secondary market that has seen the benchmark indices - the S&P BSE Sensex and the Nifty 50 - rally nearly 25% 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 micro-finance companies, non-banking financial companies (NBFCs) and private banks," explains 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 share, or about Rs 85,000 crore, of the total fund raising thus far in CY17. The companies from the sectors like power generation & distribution, consumer durables, metals, realty, retail and pharmaceutical raised over 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," says 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 in India), 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 fund raising," Chokkalingam says.

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 healthcare 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," suggests Ashok Lalwani, head of Baker McKenzie's Global India Practice.

 

Equity - Raised by Corporate Sector
Calendar year	Main Board IPOs	QIPs	Others	Total
2007	34,179	23,400	25,048	82,627
2008	16,904	3,586	31,077	51,568
2009	19,544	34,676	3,797	58,017
2010	37,535	26,147	40,780	104,462
2011	5,966	3,459	15,720	25,146
2012	6,835	4,705	32,008	43,548
2013	1,284	8,075	40,181	49,541
2014	1,201	31,684	11,417	44,302
2015	13,614	19,065	48,394	81,073
2016	26,494	4,712	15,527	46,733
2017 (As on 14/11/2017)	65,473	48,025	26,575	140,073
Others include OFS, Rights issues and IIP
Source : PRIME Database