E-Paper
India Inc prefers QIPs to overseas securities
Though the quantum of funds raised via the depository route has shot up in 2009, the corporate sector seems to be veering towards qualified institutional placements as the preferred mode for meeting fund requirements.
Though the quantum of funds raised via the depository route has shot up in 2009, the corporate sector seems to be veering towards qualified institutional placements (QIPs) as the preferred mode for meeting fund requirements.
The volatility in the US dollar, which has been the bane of India Inc in recent times, coupled with a shift towards rupee-denominated funds and easing of QIP issuance are said to be responsible for the shift away from depository receipts.
Funds raised by the Indian corporate sector via ADRs/ GDRs has jumped over 33 times from around Rs 467 crore (about $100 million) in 2008
to about Rs 16,074 crore (about $ 3.44 billion) this year. During the period, the mark-to-market value of the issuances also grew 33.7 per cent, the amount increasing to around Rs 21,494 crore ($4.60 billion).
Despite this, there was no mad rush for the channel and only 13 enterprises were involved. “With uncertain dollar and advent of QIPs, India Inc has taken a preference to Rupee denominated fund raising. When QIPs cater to this funding needs of corporate, why would one head for more volatile markets,” said Jagannadham Thunuguntla, Equity Head, SMC Capitals.
The private sector raised Rs 32,558 crore through QIPs, which generated mark-to-market returns of about 15.8 per cent, aggregating to Rs 37,714 crore or a profit of Rs 5,156 crore.
In the same period 16 initial public offers (IPOs) were listed in the primary market, which raised Rs 15,654 crore. However, on listing their aggregate value fell to Rs 15,342 crore — a 1.9 per cent or Rs 312 crore drop.
The QIP route also suits India Inc. because a company can get larger amount sanctioned by its board and raise money in parts, as per need. Compared with this, other modes of fundraising become cumbersome, with dollar volatility being the deciding factor.
The prominent among corporate sector to raise ADRs/ GDRs are Sterlite Industries, Tata Motors, Tata Steel, Tata Power, Suzlon Energy, Axis Bank, Dish TV and Sterling International Enterprises.
Among them, Sterlite Industries raised around Rs 7,453 crore ($1.6 billion) on its own.
