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Indian firms get almost $6.4 bn from share sales since January

Livemint:  March 17, 2015

Mumbai: Indian companies have raised almost $6.4 billion (about Rs.40,200 crore) by selling shares since January this year—the most since 2010, when domestic firms had raised $7.1 billion during the same period, according to a data by Dealogic, a global deal tracking firm.

As many as 20 Indian companies have managed to raise capital through the share sale route so far this year, with a bulk of this fund-raising coming from companies already listed on the stock exchanges.

Coal India Ltd’s Rs.22,600 crore offer for sale, which hit the markets at the end of January, has been the largest issue so far. It also marked the highest amount raised by the government from a single asset sale.

HDFC Bank Ltd raising Rs.10,000 crore by selling American Depository Receipts (ADRs) and through qualified institutional placement, and share sales from Bharti Infratel Ltd, Eicher Motors Ltd and Hero Motocorp Ltd are among the other significant issues since January.

“We expect approximately $16 billion of capital-raising this year in India through a mix of quality IPOs (initial public offerings) and follow-ons by private corporates with the government also expected to continue its disinvestment plans,” said Sachin Wagle, managing director of global capital markets for Morgan Stanley in India.

In 2014, Indian firms raised $11.28 billion through equity capital markets.

Wagle added that the primary driver for the buoyancy in equity fund-raising is the constructive sentiment towards stocks and high-quality companies.

Since the beginning of this year, the benchmark S&P BSE Sensex has gained 3.41%, after having surged nearly 30% in 2014.

Overseas investors have already bought a net of more than $5 billion in Indian equities so far this year.

“International investors are looking at India and they see a good opportunity to participate in Indian equities. They would prefer to participate in primary issues and block sales than buying from the market,” said S. Subramanian, managing director, Investment Banking, Axis Capital Ltd.

The capital raised by Indian companies so far this year places it at the second spot among Asian peers, outpacing fund-raising in Hong Kong, South Korea, Taiwan and Singapore.

Only Chinese companies have raised more through share sales.

So far in 2015, 142 Chinese companies have raised $24.3 billion.

India has also outperformed other emerging economies from the BRICS grouping, with South Africa ($1.7 billion), Brazil ($217 million) and Russia ($148 million) raising far less.

“On a global basis, China is facing a lot of problems and the economy is slowing down, Europe is in a bad shape and this has reduced the global opportunities to invest. India is one of the very few economies of scale, which are growing,” said Harish H.V., partner at Grant Thornton India Llp.

While share sales from already listed entities have seen success, unlisted firms have seen tepid response to their IPOs.

Adlabs Entertainment Ltd, which operates the Imagica theme park, failed to sell all the shares it wanted to last week and extended the sale by three days while also reducing the price band in which it was selling shares.

Earlier this month, New Silk Route (NSR) Advisors-backed cable firm Ortel Communications Ltd saw its share sale barely scrape through as it managed a subscription of 1.01 times the number of shares on offer in the qualified institutional buyers (QIB) segment.

In January, edible oil maker NCML Industries Ltd was forced to withdraw its initial offering after poor response from retail investors. The company was unable to attract investors despite extending the sale and cutting the price band to Rs.80-90 from Rs.100-120.

“IPOs are the only worrying spot right now. There are multiple reasons for this, investors are probably not seeing the opportunity for growth in terms of valuations and these might not be the sectors investors are keen on. But this damp enthusiasm is limited only to IPOs,” said Grant Thornton’s Harish.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

x IBEF : India Brand Equity Foundation