The Hindu Business Line : Corporate fund-raising picks up

Mumbai, June 5 Fund-raising by Indian corporates has picked up significantly with the market looking up in the first two months of the current fiscal.

Funds raised in April and May amounted to Rs 4,779 crore, four times more than in the same two months of the previous year when Rs 933 crore was raised.

This year, most of the money was raised through Qualified Institutional Placements (QIPs), while Rs 1.3 crore was raised through overseas issues such as FCCBs and ECBs, according to broking firm SMC Capitals.

During the corresponding year-ago period, Rs 932 crore was raised through rights issues and IPOs, but none through QIP.

In the last two months the Sensex has gone up more than 50 per cent, while in the year-ago period the market had risen only 3 per cent.

“Corporates have taken this window of opportunity to raise much-needed capital,” Mr Ridhim Desai, Managing Director at Morgan Stanley Equity Research, said at a conference.

IPOs in line

Merchant bankers said the two periods cannot be compared as the markets were at two extremes. “The first two months of the last fiscal were a washout, when the markets crashed. While in these last two months the sentiment has improved thanks to the elections,” said Mr Ashutosh Maheshvari, Chief Executive Officer at Motilal Oswal Investment Advisory.

Investment bankers said after the Budget there could a few IPOs, including some big-ticket PSU issues. Eighteen draft red-herring prospectus have been filed with SEBI for IPOs that can happen in the next one year.

QIPs seem to the flavour of the moment as it is easier and faster mode of raising money, said Mr Maheshvari. “It does not entail much SEBI intervention and it also has fewer participants.”

Unitech, Indiabulls Real Estate and PTC saw successful QIPs in the last two months. Now, HDIL, LIC Housing Finance and Essar Oil, among others, have announced QIPs. “Most QIPs announced are from the infrastructure and real estate sectors. This is because they are at very cheap valuations and due to the upcoming Budget there is a lot of demand for these scrips,” said Mr B. Madhuprasad, Vice-Chairman, Keynote Corporate Services.

But with so many companies announcing QIPs at the same time, there could be a problem of bunching that could again put pressure on the secondary market, say marketmen.

Caution tone

“We could witness a correction soon with so many QIPs in the market. Investors are bound to choose one over the other. At the moment they are cash-rich but soon they will run out of money. And when one QIP does badly it will be bad publicity for QIPs on the whole,” added Mr Maheshvari.

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