India Inc borrows more from overseas

BL Research Bureau Chennai | Updated on April 01, 2011


Equity deals during the quarter fell 79%

Indian corporates are increasingly looking at the international bond market for long-term funding requirements, thanks to the spike in borrowing costs. Data from the latest Bloomberg League Table shows that international bonds raised by the corporates during the three months ended March 2011, stood at $3.4 billion (Rs 15,100 crore), a good 70 per cent higher than during the corresponding quarter last year. The trend picked up during the previous quarter (December 2010) when India Inc raised $6.6 billion. This shows increased confidence of global investors in Indian companies when Europe is facing a debt crisis. Interestingly, there was no international bond issuance in the March 2009 quarter, following the credit crisis.

While international bond issuances went up, the domestic bond market witnessed a 41 per cent decline in volumes, with bonds raised adding up to Rs 34,900 crore. The fall is despite the mega-retail bond issuance from State Bank of India and infrastructure bonds, both of which were not available a year ago. Even the loan syndication market witnessed a fall in volumes of about 15 per cent. State Bank of India continues to be the leading loan arranger for corporate India and Axis Bank continues to be the leading debt syndicator.

Equity issuances fall

Blame it on market correction, Indian equity deals during the quarter fell by about 79 per cent. Corporates raised close to Rs 1,100 crore and Rs 2,400 crore through initial public offerings and qualified institutional placements this quarter respectively, as compared to Rs 5,800 crore and Rs 3,800 crore in the March 2010 quarter. There were no mega-issuances this quarter such as the NTPC and REC follow-on public offers seen last year. SAIL and ONGC offers were postponed to the next fiscal. Incidentally, the Government divestment target was revised downwards to Rs 20,000 crore from the Rs 40,000 crore targeted earlier. Tata Steel's follow-on offer is the largest of the equity deals with Rs 3,480 crore of capital raised and PTC Financial Services the largest IPO.

The underwriting fee this quarter for equity deals improved from 0.47 per cent to 2.08 per cent, again because of a lack of Government issuances. While fee for a deal improved, only 19 equity deals were done by the underwriters as against 44 deals a year ago. Citi continued to be the largest investment banker of equity deals by volumes and size.

Published on April 01, 2011

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