The Hindu Business Line : Cos raise $3.5b in 2 months — Placement of shares/bonds overseas

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Cos raise $3.5b in 2 months — Placement of shares/bonds overseas

Rajesh Abraham

Alarmed over the growing number of GDRs/ FCCBs, SEBI on January 18 came out with a proposal to create an `alternative regulated placement' of shares and bonds in India.

Mumbai , March 4

While the Securities and Exchange Board of India (SEBI) is considering a regulated placement of shares/convertible bonds in the country to encourage listed companies to tap the domestic market as against the prevalent trend of tapping the overseas market, India Inc seems to be in no mood to wait.

In just over two months into this calendar, Indian listed companies have either raised or announced plans to raise over $3.5 billion through GDRs and FCCBs (foreign currency convertible bonds). According to data compiled from BSE and merchant bankers, over 20 companies have raised over $2.2 billion this calendar through GDRs/FCCBs while another 6-7 companies have announced plans to raise over $1.1 billion in the same manner in the coming weeks.

This is a continuation of the trend last calendar when India Inc raised a $17 billion from the foreign markets.

Speed - a key attraction

"One main reason why Indian companies tap the overseas market is the speed with which they can raise funds," said Mr Prithvi Haldea, Managing Director of Prime Database, which tracks share and bonds issuances by Indian companies.

Premium is another draw

In addition to the speed, another reason why Indian listed companies are attracted to the overseas market is the premium that they receive on their shares, compared to the domestic prices. "A follow-on public offer or a rights issue in India may not get a significant premium over the current price in the Indian bourses," explained a merchant banker.

He said Indian promoters also get a lock-in undertaking from the foreign investors for GDRs/FCCBs.

Most of the GDRs/ FCCBs are raised from London, Singapore and Luxembourg Exchanges. "Listing on these overseas stock exchanges is less time-consuming as there are lesser procedural delays," the merchant banker said.

Alarmed over the growing number of GDRs/ FCCBs, SEBI on January 18 came out with a proposal to create an `alternative regulated placement' of shares and bonds in India.

As per the proposal, listed Indian companies can raise funds through the private placement of bonds/shares to FIIs (Foreign Institutional Investors) registered with SEBI.

"It appears that the GDR/FCCB route is preferred by listed companies mainly on account of its time and cost effectiveness.

"While on the one hand this is resulting in a gradual export of the domestic market, on the other hand, it is impacting the depth of the domestic markets," said the SEBI discussion paper.

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