Thanks to recovering economy! India Inc may raise over Rs 70,000 cr via QIPs, IPOs, FPOs & rights issues

MUMBAI: Indian companies could raise more money as equity this year than in the past five as a benign market environment and a recovering economy raise hopes of a faster turnaround in business fortunes.
Firms plan to raise Rs 52,986 crore through qualified institutional placement (QIPs) in 2015, according to an analysis of corporate announcements on stock exchanges and conversations with merchant bankers and companies. This will be higher than Rs 31,684 crore raised last year. If one includes rights issues, follow-on offers and IPOs, the figure for 2015 could rise to over Rs 70,000 crore, the highest after 2010 when Rs 80,000 crore was raised. These figures don’t include PSU selloff and offers for sale of these firms where money is not infused into the company.

"The time is perfect as the retail investors market is conducive with a strong line-up of IPOs around the corner," said Sanjay Sharma, MD and head of equities & capital markets at Deutsche Bank.

Indian stocks have risen 68% since the 2013 low of 17,903 in August and were the world’s second best performers in 2014 after China with a 31% gain in dollar terms.

India’s economy, touted as the brightest spot in Asia by S&P, is set to overtake China’s in 2016 with a growth rate of 6.5% versus China’s 6.3%, the International Monetary Fund said in its world economic outlook in January this year. Since then, India’s GDP revisions have lifted the numbers with the government projecting growth to touch 8.5% in FY16, according to the Economic Survey.

"In the near term, we will see a lot of FPOs and QIPs," said Raj Balakrishnan, co-head (investment banking) Bank of America-Merrill Lynch. "But there is a lot of activity going on in the background with regards to documentation for IPO filing – there is a strong pipeline of IPOs and you will see considerable action in the second half of 2015." Banks and financial services companies are likely to lead the fundraising this year as well with State Bank of India alone contemplating a QIP of Rs 10,000-15,000 crore, followed by Bank of India, Punjab National Bank, Canara Bank and others.

Other non-financial majors likely to tap the market include JSW Energy with a Rs 5,000-crore QIP, Torrent Pharma with Rs 3,000 crore and Aurobindo Pharma with Rs 2,100 crore.

FUND-RAISING AT ALL-TIME HIGH

Vikas Khemani, president and chief executive officer of Edelweiss Securities, who helped companies raise roughly Rs 15,000 crore, said fundraising could be at an all-time high helped by economic turnaround and a rush to deleverage. "I expect 60% of the funds raised could be from QIP and rest others," said Khemani, whose mandates for such issues have risen four-fold.

Other big issuances this year could be the proposed IPOs by private sector insurance biggies such as ICICI Prudential and HDFC Life. ICICI is considering a sale of minority stake to private equity firms while HDFC has already sold 1% to Azim Premji Trust. It is not clear when they will hit the market.

"It is a positive time to list and people who want exposure to financial services are looking to invest in insurance company stocks," said Amitabh Chaudhry, MD & CEO of HDFC Life. "There will be strong amount of interest from both domestic and international investors." In 2014, companies raised Rs 70,218 crore through various equity formats, including QIPs, ADRs/GDRs, preferential equity offers, IPOs and FPOs.

This calendar year, nearly Rs 15,256 crore has been raised compared with about Rs 20,000 crore last year.

The pipeline of IPOs waiting to be cleared by the Securities & Exchange Board of India is just over Rs 7,500 crore but it is not clear how many will receive clearances in time.


FUNDS FOR CAPEX & REPAYING DEBT

S Subramanian, managing director and head of investment banking at Axis Capital, a local investment bank owned by Axis Bank, estimates that fund-raising in 2015 will top last year’s levels by at least 40-50%. Banks and infrastructure companies burdened with debt could lead issuances, he added. Axis Capital helped raise Rs 20,000 crore for companies last year.

Some of the money being raised will help pay down debt and fund expansion. Tata Motors, India’s largest truck maker, said in January that it will raise Rs 7,500 crore through a rights issue to fund expansion of its trucks business. Public sector banks, saddled with debt, need money to set right their capital adequacy ratios.

"The IPO market will start reviving from April after a gap of three years and is expected to continue throughout the fiscal year," said S Ramesh, joint managing director at Kotak Investment Bank, which helped companies raise roughly Rs 30,000 crore in 2014. "The optimism is driven by Indian companies seeking to raise capital to fuel growth. Companies in which PE funds invested are ripe enough to get listed and promoters (are) open to dilute stake through a QIP for a healthier leverage ratio."

(With inputs from Shilpy Sinha)