India Inc betters appetite for overseas funds

Raises Rs 1,54,272 cr between during Jan-Sept.

Riding high on a booming economy, India Inc is breaking all records in fund raising. Indian corporations and banks have raised Rs 1,54,272 crore in the first nine months between January and September in calendar year 2006 excluding follow-on equity issues.

This is 37 per cent higher than what they had raised in the corresponding period of 2005 (1,12,583 crore). What more, this is also higher than the amount (Rs 1,44,769 crore) raised in the whole of 2005.

"This signifies that despite rise in interest rates, companies are firmly on the growth path. In other words, rising rates have not been able to dent the growth of corporate India," said a foreign banker.

Since the beginning of 2006, the cost of borrowing for triple-A rated companies has gone by at least one and half percentage points.

Debt raised overseas through loans, bonds and convertible bonds amounted to Rs 70,637 crore, an increase of 41 per cent over a year earlier despite a rise in the cost of overseas borrowings.

Banks accounted for almost half of the debt raised from domestic market as they rushed to to raise money to shore up their capital adequacy ratio (CAR) through issue of bonds qualifying as perpetual Tier-1 and Tier-II capital.

Banks are required to maintain a minimum CAR of 9 per cent and are in need of capital to support credit growth and also to provide for additional capital requirements as a revised capital adequacy framework (popularly known as Basel II) gets implemented from March 31, 2007.

Despite a lull in equity issues following a sharp correction in May, the total amount raised through initial public offers (IPOs) more than doubled to Rs 15,470 crore during January-September 2006 from Rs 7,592 crore a year earlier.

The aggregate of all IPO during the nine months period is also 59 per cent more than the amount raised through initial floats in the entire 2005.

The story of Indian companies and banks tapping the overseas debt markets had begun in the middle of 2003 and since then the amount raised has only been on the rise.