Capital crunch? India Inc raises over Rs1,50,000 crore in 2009  

December 21, 2009

Companies knocking on government doors for bailout funds may have been the norm in the West, but India Inc begged to differ from this rule by raising over Rs1,50,000 crore of capital for expansion from investors across the world in 2009, reports PTI.

The biggest irony is that nearly two-thirds of these funds are estimated to have come from investors in overseas markets, which themselves were in shambles and where companies were in dire need of capital, forcing them to beg their respective governments for money.

Also, Indian companies took the quick-fire qualified institutional placement (QIP) route to meet their immediate capital needs, instead of the time-consuming initial public offering route. As a result, the funds raised by Indian companies during 2009 were more or less equal to the levels seen in 2008, when the economic downturn was not a reality for most part of the year.

Besides, the response was more than required as demonstrated by the books being highly over-subscribed for most QIPs and even some IPOs.

A total of about 50 companies raised a record-breaking cumulative figure of about Rs55,000 crore through sale of shares to qualified institutional investors, mostly overseas private equity firms and also local and foreign financial services firms like banks, insurers and fund houses.

According to global consultancy firm Grant Thornton, the private PE and QIP space saw 221 deals till 13^th December totalling $11.20 billion (about Rs52,000 crore).

"The worst seems to be over for PE investing and clearly there is renewed PE interest in investing in the country, specifically in sectors supporting India's domestic consumption like education, healthcare and real estate. As a result, PE activity in 2010 is expected to rise significantly," said S Krishnan, executive director, PricewaterhouseCoopers.

Ernst & Young's partner and national director Pankaj Dhandharia said, "PE investment activity is on the rise again as is evident from the deal activity, which has picked up in the past couple of months." He added that India, which is on a growth trajectory and with its ability to generate relatively superior returns, would attract even higher degrees of capital (including private equity) in the years to come.

It was realty major Unitech which kicked off the QIP bandwagon earlier in the year and raised a total of close to Rs4,500 crore in two separate deals. Other major QIP deals of the year included a consortium of foreign players putting in close to Rs3,000 crore in Indiabulls Real Estate.

Similar amounts were raised by Axis Bank and Hindalco, while a number of smaller fund-raising deals were also inked successfully.

The QIP performance of 2009 was even better than the total of a little over Rs20,000 crore—a record at that time—raised through this route during 2007, when the markets and economy, both in India and abroad, were flying high. The QIP funds raised by India Inc were not even Rs2,000 crore in 2008.

It was the QIP push that took India Inc's fund-raising spree in 2009 to the overall levels seen in the previous year, as capital-raising activities turned tepid in 2009 on fronts like IPOs and overseas instruments like American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and Foreign Currency Convertible Bonds (FCCBs).

The overseas fund-raising through depository receipts or external commercial borrowings fell down to nearly Rs75,000 crore from close to Rs1,00,000 crore in the previous year.

Still, India Inc had its hands full in 2009 with funds exceeding Rs1,50,000 crore—almost equal to the levels in 2008, although short by close to Rs1,00,000 crore from about Rs2,50,000 crore it got in 2007.

"2009 was a year of recovery in terms of fund-raising by India Inc, but the hyper-enthusiasm of 2007 is yet to return to the market. During the year, promoters have gone ahead with the compulsory expansion plans, while they postponed discretionary projects," brokerage firm SMC Capitals' equity head Jagannadham Thunuguntla said.

As the Indian economy started showing signs of revival and the stock market recovered from the lows it touched in March on increased buying support by institutional investors, fund-raising activity also increased.

The IPO market was also not that bad, if seen in terms of average fund-mopping activity. While a total of 20 companies raised close to Rs20,000 crore in 2009, a total of Rs32,000 crore came from 37 IPOs in 2008. However, a worrying factor was low participation of retail investors in the IPOs.
— Yogesh Sapkale