India Inc finding it difficult to raise foreign funds
Foreign sources as a source of funding for Indian companies is drying up, if January-March 2008 quarter is any indication. Foreign sources, which surpassed domestic fund raising by the Indian companies in the same quarter last year, saw their share falling to 4.78 per cent of the total funds raised in the just concluded quarter.
The contribution of foreign sources to capital plans of Indian companies dwindled to just over 11 per cent of what it did last year’s quarter from Rs 26,983 crore (at the present rupee reference exchange rate of Rs 39.98 per US dollar) to Rs 3,015 crore, according to Bloomberg.
Merchant bankers say, the present global scenario marked by turmoil in credit markets is unlikely to be a favourable condition for tapping foreign sources of funds.
Despite the turbulence in the initial public offerings (IPO) market in the last couple of months, the quarterly performance continued to be good, with 116 per cent growth over the previous year quarter.
“The companies will be watching the developments in the market. But if they feel it necessary for raising funds, many of them may opt for hybrid equity issues,” Antony Kottackal, Sr Vice-President of SBI Capital Markets. SBI Capital has claimed third position in the domestic equity and rights category, after Deutsche Bank AG and Kotak Mahindra Investment Banking.
With market in a volatile scenario, the companies are expected to wait for better valuations before riding on IPOs, in a whole hog. Companies raised over 16,000 crore through IPOs during the first quarter 2008.
Though ADR/GDRs are expected to contribute less to the total funds raised by Indian companies, “foreign investment through foreign institutional investor (FIIs) channel into equities is going up of late,” Antony added.
Rights issues shot up by over 19 times from last year during the quarter. This may be a one time affair given the fair valuations for their stocks in the market enabling them to offer discount and raising fair amount of funds at the same time, another merchant banker who wished not be quoted, said.
Qualified institutional placements are also expected to lose steam with the new pricing norms of the Securities and Exchange Board of India (Sebi) coming into force.