Will be India Inc’s highest-ever capital mop-up.
Riding a booming stock market and buoyant economy, corporate India is set to end the calendar year with record fund raising from the primary and secondary markets.
Indian companies have raised over Rs 3.13 lakh crore up to September, excluding foreign currency convertible bonds (FCCBs) and external commercial borrowings in September. This is close to the cumulative Rs 3.14 lakh crore raised in 2009, according to Business Standard Research Bureau and Prime Database. India Inc’s highest fund mobilisation was in 2007, when it mopped up over Rs 3.20 lakh crore.
With around three months to go and several large companies, as well as small and medium-sized firms, gearing up to raise funds for expansion and capital needs, cumulative fund raising is likely to touch Rs 4 lakh crore in this year, industry observers said.
Funds are also being raised from overseas secondary markets in the form of depository receipts, FCCBs, non-convertible debentures, convertible bonds and qualified institutional placements. A rough estimate from over two dozen companies indicates they are gearing up to raise over $12 billion (around Rs 55,000 crore) in coming months. They include Mukesh Ambani-controlled Reliance Industries, brother Anil Ambani’s ADAG Group, Tata Group companies like Tata Steel and Tata Power, as well as GVK, GMR, Suzlon, Jet Airways, Uninor and others.
“In the past two to three years, most companies had to postpone their expansions and fund-raising activities due to the global economic slowdown and uncertainty. Due to favourable business conditions, they have now revived their capital-raising plans, either to clear debt or to execute ongoing and pending projects,” said Prime Database Chairman & Managing Director Prithvi Haldea. The government’s plans to raise $10 billion through disinvestment are beginning to materialise, and this will create more capital inflows to the markets, he added.
India Inc’s aggressive appetite for capital stems from a combination of favourable factors. These include expectations of 9 per cent-plus GDP growth, a good monsoon that may spur agriculture growth close to 3.8 per cent, industry growth of above 10 per cent and the service sector recovering to near-10 per cent growth. Continuing favourable policy decisions and stress on infrastructure growth has also helped, say industry experts.
Some 20 initial public offerings are waiting in the wings, including the largest ever by Coal India. Large floats by L&T Finance, IndiGo, Prestige Estates and Muthoot Finance are likely in the coming months.
September, the month in which the Nifty crossed the landmark 6,000 and Sensex breached 20,000 levels for the first time since January 2008, was a watershed for Indian industry. It witnessed 16 small to medium-sized IPOs raising over Rs 4,000 crore. Compared with this, the previous four months together saw just 10 IPOs, raising an almost equivalent amount.
“In 2010, foreign institutional investor inflow stands at over $19 billion -- the highest ever so far -- and the euphoria is also spreading to the primary markets. This year is likely to end up with the highest domestic fund-raising in the primary markets,” said a recent report of Motilal Oswal.
| FUND FRENZY | ||||||
| Rs crore | IPOs & FPOs | Debt offers | Rights isues | Private placements | QIPs | FCCBs & ECBs |
| 2004 | 30,510.83 | 2,383.14 | 3,311.41 | 52,345.39 | 53,892.73 | |
| 2005 | 22,753.64 | 4,094.85 | 4,386.58 | 74,597.37 | 52,650.19 | |
| 2006 | 24,679.26 | 0.00 | 3,531.05 | 98,014.05 | 3,935.45 | 1,04,616.48 |
| 2007 | 45,141.59 | 1,000.00 | 14,085.12 | 1,05,845.89 | 23,400.34 | 1,31,186.28 |
| 2008 | 16,927.48 | 0.00 | 31,053.98 | 1,61,808.97 | 3,586.45 | 98,221.18 |
| 2009 | 19,566.63 | 3,500.00 | 3,774.34 | 1,69,208.02 | 38,675.75 | 80,244.68 |
| 2010* | 39,682.64 | 4,400.00 | 9,169.60 | 1,68,252.24 | 21,184.94 | 70,485.62 |
| *Data up to Sep 2010, FCCBs & ECBs up to Aug 2010, Compiled by BS Research Bureau Source: Prime Database | ||||||
Foreign funds are able to garner money at zero or nominal interest rates in their homelands and are looking at investment opportunities in high-growth countries like India. This has created a comfortable situation for Indian corporates to access easy finance, says Ramesh Swaminathan, drug major Lupin’s president-finance & planning and chief financial officer.
Backed by the government’s infrastructure stimulus, vibrant fund-raising activity is taking place in sectors like power, roads and airports. A few days ago, Union Minister for Power Sushilkumar Shinde said the scope for investment in the power sector alone over the next few years is well over $300 billion.
“Many infrastructure projects, especially ongoing power projects, are now in the equity investment phase. Equity investment in infrastructure requires about $150 billion in for the next five to seven years. I expect $500-700 million worth of investments in private-equity deals alone in coming months,” said Sanjay Sethi, executive director and head of infrastructure group at Kotak Mahindra Capital.
