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Corporate India’s fund raising declined significantly in the first half of the current calendar year. Due to correction in the equity markets, the funds raised through public offers, institutional placements and FCCBs fell. The sliding rupee made companies wary of overseas debt too.
According to the Bloomberg’s India Capital Markets League Table, during the first six months of the current calendar year, funds raised through initial public offerings (IPOs) declined by 62 per cent year-on-year. Qualified Institutional Placements (QIPs), FCCBs and overseas bond raising declined by more than 60 per cent as well.
The funds raised through IPOs and QIPs were Rs 2,400 crore as compared to Rs 21,400 crore raised in during the period January 2010 -June 2010.
Deals
In terms of deals, around 28 companies tapped the IPO market during the first six months of 2010. The count declined to eight during the current calendar year. More importantly, the ticket size also declined. From an average Rs 360 crore per IPO in January-June 2010, the average IPO size has declined to Rs 165 crore.
The lead manager’s fee has risen from 2.48 per cent per deal to 3.25 per cent per deal.
Of the Rs 1,300 crore equity raised, Rs 660 crore was raised by MCX alone. Much of the fund raising also was in the form of stake sale (divestment) rather than fresh equity. A couple of IPOs were also withdrawn given low investors appetite for primary market issuances.
Only public offers which had niche businesses (scarcity premium) got good subscription.
India Inc’s favourite fundraising instrument, QIP route also didn’t have much appetite due to low valuations of the listed stocks (which makes it highly dilutive for the existing shareholders to raise equity). From 25 companies raising QIPs in first half of 2010, the overall deals declined to five in the current year.
Interestingly, companies haven’t raised any equity through QIP route in the three months ended June 30.
Debt
Domestic bond market was the only route through which more funds were garnered as compared to a year ago.
Given that there was little borrowing done through international bond markets, the domestic bond market saw greater demand for funds.
The domestic bonds raised grew by 59 per cent year-on-year.
The loans from foreign banks declined by 45 per cent due to growing risk aversion.
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