India Inc's fund raising may prop up stock mkt in 2010

The stock market is likely to climb substantially higher in 2010, if corporate India manages to raise up to $ 15 billion (about Rs 74,000 crore) over the next few months, a latest Credit Suisse report says. 

As per financial service major Credit Suisse's India market strategy report, a host of companies, including Aditya Bira Nuvo, Bajaj Hindusthan, Adani Power, are planning to tap the capital markets in the coming months through various routes including private placement and preferential allotments.   

"If Indian companies succeed in raising $10-15 billion over the next few months, even if equity markets were to reverse later in the year on global factors or on domestic policy tightening, corporate fundamentals could be on the way for market to be substantially higher in 2010," Credit Suisse research analyst Nilesh Jasani said in a report. 

The report advised investors, who are confident of the political outcome and global rally, to pick from the list of companies about to finish funding.  

"Some of those who need money are likely to be quicker, more efficient and less valuation demanding than others. Those who succeed will have their long-term business fundamentals changed even if markets were to reverse again," it added. Meanwhile, as per general assumptions if too many firms issue equities to raise money in a roaring stock market, at some point it may stop going up and might even come down.    

This argument is generally seen as valid with hindsight but it is never easy to forecast how much a rising market would be able to absorb in new shares before getting tired, Jasani added. The report pointed out that it believes that Indian fundamental story in 2008 got derailed because highly geared and negative cash flow business groups could no longer raise money in capital markets.   

The companies are planning to raise funds up to Rs 29,547 crore (about $ 6 billion) from capital markets in the coming months. According to reports, the companies planning to raise funds include Aditya Birla Nuvo for its life insurance business (Rs 150 crore), Bajaj Hindusthan (Rs 1,500 crore), GMR Infra (Rs 3000 crore through private equity route).    

Other firms include —Indiabulls Real Estate whose board has approved a plan to raise Rs 3,000 crore through Qualified Institutional Placement of securities, Pantaloon Retail to mop up Rs 1,500 crore through a mix of preferential allotment of shares to promoters and PE funding. Further, Adani Power has recently refiled the draft prospectus for an initial public offer with the market regulator SEBI.