New Delhi :Making it a blockbuster year, India Inc has garnered Rs 6.3 lakh crore from capital markets in 2015, with bonds or ‘dynamite’ securities emerging as the preferred route while euphoria is back in equities as well.
The experts are confident the buoyancy will continue and may even turn stronger in the new year when it comes to raising funds through issuance of bonds and stocks that the companies need for their business expansion and for part-monetisation of the assets.
The debt securities, or bonds, accounted for close to Rs 5 lakh crore worth of funds raised this year, thus becoming the dynamo for the fund-raising plans of Indian companies.
Interestingly, RBI Governor Raghuram Rajan has just given a new nomenclature by calling debt as ‘dynamite’, albeit in some other context, while talking about bad loans of banks.
Fresh capital raked in from equity market stands at about Rs 1.2 lakh crore, which mostly came from preferential share allotments to promoters and others and OFS (offer-for-sale) on stock exchanges. IPOs have also recovered but the quantum of funds remain relatively small at just about Rs 15,000 crore.
The cumulative total of Rs 6.3 lakh crore raised this year compares with Rs 5.85 lakh crore collected from the domestic and overseas capital markets in 2014.
This year, funds totalling Rs 5.75 lakh crore have come from the domestic markets and Rs 58,900 crore from abroad through instruments like ADRs, GDRs and overseas bonds.
Market experts believe that fund-raising through equity and bond markets will remain buoyant in the year ahead too.
“Overall funding scenario will be very good for Indian companies in 2016 too on better economic prospects,” Geojit BNP Paribas Research Head Alex Mathew said.
Echoing similar views, investment planning platform 5nance.com Founder and CEO Dinesh Rohira said: “Money in the coming year will be more available for high growth businesses.”
This year has seen hectic fund raising activities in the IPO segment despite a flat market. Generally, IPO booms follow a robust equity market.
In 2016, a number of companies plan to hit the capital markets and several others are awaiting Sebi’s approval to float their public issues.
“We expect to see IPOs worth nearly Rs 15,000 crore to hit the market in the year ahead. Issues where Sebi’s approval has been received so far amount to an estimated Rs 7,865 crore, and issues to the tune of Rs 6,395 crore are awaiting Sebi’s approval,” ICICI Securities Director Ajay Saraf said.
“The year 2016 will see the growth of the IPO markets with newer, concept businesses going out and taking advantage of the market conditions, we could see e-commerce and insurance segments finally going to markets next year,” Rohira said.
Quantum AMC Managing Director and Chief Information Officer I V Subramaniam said: “IPO market will depend on the equity markets scenario. Besides, pricing will play a crucial role.”
In addition, the government’s divestment programme will also look to tap investor interest. The target for the current
financial year, ending March 2016, stands at Rs 69,500 crore, of which just 20 per cent has been raised.
CNI Research Head Kishor Ostwal said, “Rate hike by the US Fed will not have any major impact on the fund-raising scenario.”
“With RBI retaining its accommodative stance, we expect the bond markets to remain buoyant. On the equities front, we expect quality IPOs and QIPs that are in the pipeline to go through. In addition to these, there are a few large sell downs by the government via the OFS route which we expect to see in the year ahead,” Saraf added.
This year, the funds have been primarily raised for business expansion plans and to meet capital requirements.
A large chunk of this amount or Rs 5.75 lakh crore has been mopped up from Indian markets, while Rs 58,900 crore has been raked in via overseas capital markets, where companies raised funds through instruments ADRs, GDRs and bonds.
Within Indian markets, most of the fresh capital has been collected through debt markets.
“This is primarily because of the falling interest rate cycle in 2015 where RBI has cumulatively cut rates by 125 basis points. In such a scenario, bonds become a preferred alternative to bank loans.
“On the equities side, global markets have been volatile during the year on the back of a slowing Chinese economy, falling commodity prices and the imminent rate hike in the US,” Saraf added.
In the debt segment, companies have raised Rs 4.44 lakh crore through debt placement route while Rs 6,218 crore has been mopped up through public issuance of debt and Rs 5,000 crore through QIP.
In the equity market, the preferential allotment of shares helped garner Rs 40,422 crore, followed by OFS (Rs 35,520 crore), QIP (Rs 17,694 crore), IPO (Rs 15,000 crore) and rights issue (Rs 12,568 crore).
In 2015, there were as many as 20 main-board IPOs, which together pocketed about Rs 15,000 crore, making it the best period in the past few years in terms of fund raising through such plans.
In comparison, six IPOs had hit the market in the entire 2014 and garnered just Rs 1,261 crore, while three firms had launched their public issues in 2013 to mobilise Rs 1,284 crore.
During 2015, the market saw blockbuster IPO of IndiGo’s parent firm InterGlobe Aviation, which raised Rs 3,008 crore. This was the biggest IPO in the Indian market since Bharti Infratel’s over Rs 4,000 crore public offer in December 2012.
Another high-profile public issue was that of Coffee Day Enterprises, which runs Cafe Coffee Day (CCD) chain. It raked in Rs 1,150 crore.
Companies have tapped the initial share-sale route to provide opportunity for private equity players to exit. Besides, positive returns and strong demand from domestic investors have contributed to the upsurge of the IPO market.
When it comes to overseas market, Indian firms have raked in Rs 49,033 crore through bonds and another Rs 9,872 crore through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).