After raising record sums of money through the debt and equity routes in the domestic market last year, India Inc found capital flows drying up in the first six months of 2011.

Data compiled by the news agency Bloomberg show that sums raised through Qualified Institutional Placements (QIPs) fell almost three-quarters in the first six months of 2011, compared to last year. Amounts collected by Initial Public Offers (IPOs) were down 66 per cent and those from rights offers by a third in the first six months. India Inc also reduced the amounts raised through syndicated loans.

The only route that companies tapped quite aggressively this year was the international bond markets, where the amount garnered more than trebled. The low interest rates on global borrowings, even as interest rates back home were inching up, seem to have driven this shift.

For equities, secondary market volatility and beaten down valuations weighed on corporate fund-raising plans.

Primary markets suffer

Low market valuations, the slow start to the Government's disinvestment plan and underperformance of recent IPOs led to low inflows of Rs 3,400 crore into IPOs during the first half of this calendar year.

It is noteworthy that the sums raised from new offers during the first half of the current year are the lowest since this market rally got under way.

Muthoot Finance, which raised Rs 900 crore in May 2011, was the largest IPO as against the Rs 2,262-crore public offer of Jaypee Infratech during the same period last year.

Even QIPs, a favourite source for corporate fund-raising in recent years, have slumped. Here, as the majority of stocks that made such placements have underperformed over the last three years, it is possible that FIIs have been wary of such offers. Financial companies, which needed to bolster their capital adequacy, accounted for 98 per cent of the Rs 3,000 crore raised in 2011.

Domestic borrowings

Though raising equitybecame more challenging, companies seemed to turn conservative on their borrowings as well. The total sum collected by companies by way of domestic and international debt stood at $59.1 billion in the first six months of 2011, against $70.4 billion last year.

Domestic debt and bond market borrowings dropped by 11 per cent and 37 per cent respectively, probably in deference to high interest rates.

Companies which did need funds, especially financial institutions, shifted to the international bond markets to raise money. Foreign bond issuances went up by 250 per cent to $7.8 billion year to date. The trend of tapping international bond markets began in the December 2010 quarter.

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