Riding on the strong secondary market sentiment and foreign institutional investment (FII) inflows, corporate fund-raising through various instruments went up by nearly 36 per cent during the first half (H1) of 2007, to touch Rs 1,59,843 crore.
Though fund raising through Qualified Institutional Placements (QIP) was launched in India to enable quick access to funds for firms, the appetite of Indian companies for foreign funds remains high. Funds raised overseas rose by 61 per cent to touch a high of Rs 97,143 crore in H1, while domestic resource raising was up by a meagre 9 per cent at Rs 62,700 crore, according to data compiled by Bloomberg.
Funds raised through QIPs and follow-on public offerings (FPOs) together amounted to Rs 12,900 crore, against Rs 8,700 crore raised through FPOs alone during H1 2006. Indian companies raised Rs 18,500 crore thorugh initial public offerings (IPOs) in the first half of 2007, which is up 35 per cent compared to the previous year. ICICI Bank, DLF and Power Grid Corporation were the major issuers during the just concluded quarter.
Corporate interest seems to have shifted to international bonds, the pipe of which expanded by over 750 per cent in the first half over the same period the previous year.
As much as Rs 23,822 crore was raised through bonds abroad, though in absolute terms, syndicated loans and domestic bonds still occupied the top two slots.
SP Prabhu, Associate Vice-President of IDBI Capital Market Services said, "During the last six months there was a liquidity tightening (rate hike or cash reserve ratio hike) in India. Currently 10-year paper is costing over 10 per cent for the borrower in India, while high rated companies are able to raise funds at 8.5 per cent in the international market, making it attractive."
American/Global Depository Receipts (ADR/GDR) issues have bounced back. These issues, which slumped over 94 per cent to barely about $50 million (Rs 220 crore) the first quarter of 2007 compared to the previous year’s quarter, rose steeply in the second quarter to touch $4.8 billion (over Rs 19,400 crore).
FCCBs (foreign currency convertible bonds) were up marginally. However, FCCBs are likely to be more attractive to QIPs during the next few quarters. "Funds could be raised through FCCBs at a price premium of 25-50 per cent by good companies, while one has to offer a discount on the ruling price in QIP. Besides, unlike in FCCB issues, QIP issues will lead to immediate dilution of capital," said Shailendra Jindal, CEO, Mehta Financial Services.
Domestic bonds seems to have become less attractive as could be seen from 10 per cent deceleration in its growth to Rs 31,300 crore from Rs 35,000 crore in the first half of 2006. The growth of syndicated loans also slowed down with a fall of more than four per cent in the mop-up.