India Inc’s equity fund raising has already crossed Rs 1 lakh crore mark in 2015 so far with the markets having been on a roll for the better part of the year, reports Ankit Doshi in Mumbai. Companies have picked up Rs 1.04 lakh crore, the third highest mop-up after 2007 and 2010. Investment bankers said fund raising was largely dominated by secondary market offerings. Offers for sale (OFS) and qualified institutional placements (QIP) accounted for half the quantum of money raised this year.
Sumit Jalan, ECM head and director, Global Market Solutions at Credit Suisse (India) said the fund raising reflected a pick-up in investment cycle.
Jalan, however, pointed out that a huge quantum of secondary market offerings did not necessarily indicate economic growth or business expansion.
Many companies have tapped markets after a four-to-five year lull. The difference this year is that we have seen more secondary market offerings though that does not necessarily indicate economic growth or business expansion.
Nevertheless, the long-term macro trend remains intact and more companies could raise equity, said Jalan, whose firm helped Syngene International’s go public in July 2015.
More than 60 companies scrapped their IPO plans between 2011 and early 2014 due to unfavourable market conditions, halting plans of Indian companies to raise more than Rs 65,000 crore through primary markets. The government sold a 10% stake in Coal India (CIL) via the OFS in the end of January 2015 and raised Rs 22,557 crore in the biggest equity offering in India’s capital markets. In the last week of August, the government also sold a 10% stake in Indian Corp that helped mobilise R9,300 crore and making it the fourth largest OFS.
Dharmesh Mehta, MD & CEO, Axis Capital, said the Street had been starved of quality paper for the past few years, adding the numbers reflected confidence in India. Domestic and foreign money should continue to flow into equities. We will have short corrections and volatility but the long term trend is bullish, Mehta said.
In 2007, India Inc witnessed record equity issuances. Corporates raised Rs 1.37 lakh crore during the peak of the previous bull run followed by Rs 1.36 lakh crore in full-year 2010. Merchant bankers said primary markets have also shown marked improvement, albeit with caution. While the long-term is foreseen as positive, recent developments in global financial markets and fears of a hard landing in the Chinese economy have increased challenges for India’s primary markets that is recuperating after four years of lull.