Indian companies raised 26 per cent less funds in the first nine months of 2009 compared with the same period a year ago, mainly because of the mood of gloom that pervaded the economy at the start of the year.
Market players are now turning optimistic about the momentum in raising capital. The year has seen the rise of qualified institutional placement (QIPs) — the issue of shares by private placement to funds — emerge as a strong option for companies hungry to fuel growth amid poor sentiments in the retail investment market.
The corporate sector raised Rs 37,570 crore in the January-September period against Rs 47,382 crore in the same period of 2008.
A recovery emerged after a chilling January-March quarter, when fund raising slumped to a mere Rs 664 crore, plunging headlong from Rs 35,664 crore in the same quarter of 2008, when the economy was at a heady high.
“Until July 2008, the Indian economy was not facing much of a problem and the cash crunch came only around September. Acontinuation of the 2007 euphoria had kept the markets up and helped raise such kind of money,” said Hitesh Agrawal, Head of Research at Angel Trading.
He said the current quarter will see a big jump in fund-raising.“With increased confidence, the last quarter of 2008 calendar year would be the best,” Agrawal said.
“The current point marks the highest level of confidence we have seen in last two years. QIPs came as breather of life for India Inc. followed by divestment move by the government with which IPOs (initial public offers) also caught up. The pipeline for fund raising is quite healthy now,” said Jagannadham Thunuguntla, head of equities at SMC Capitals Limited.
QIPs are certainly the flavour of the year. Rights issue proceeds for January-September in totalled Rs 29,434 crore compared with this year’s Rs 3,321 crore while QIPs multiplied by more than 10 times to Rs 12,209 from Rs 2,104 crore in corresponding period of 2008. Rights issues are shares offered to existing shareholders.
IPOs were less fancied, as they fell marginally to Rs 13,017 crore from more than Rs 15,820 crore in 2008. FPOs (follow-on public offers) held steady at around Rs 23 crore.
Both IPOs and FPOs have not been fancied this year because of the poor appetite in the retail market, with investors having burnt their fingers in the crash that happened in 2008.