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Record raising of funds in 2010

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lines up Rs 1,50,000 crore equity sales

India Inc could set a new fund-raising record in 2010. Even before the year starts, companies have lined up equity raising plans of Rs 1,50,000 crore, close to two-and-a-half times of what they raised through share sales this year.

According to data collated by Business Standard research bureau, 96 companies raised Rs 64,750 crore this year through qualified institutional placements (QIPs), initial public offers (IPOs) and right issues to existing shareholders.

Red herring prospectus for filed with the Securities and Exchange Board of India (Sebi) and fund-raising plans announced by listed companies to stock exchanges suggest that 129 companies intend to tap the capital market in 2010.

With more companies expected to be added to the list as the year progresses, the 2007 record when 176 companies mobilised Rs 82,627 crore could be consigned to history books. The data for next year do not include the public offer for stake sale in public sector companies as the government has not yet finalised the details.
 

MONEY MARKET
AMOUNT RAISED (in Rs crore)
Year IPO QIP Rights Total
2004 30511.00 3311.00 33822.00
2005 22754.00 4387.00 27141.00
2006 24669.00 3935.00 3531.00 32135.00
2007 45142.00 23400.00 14085.00 82627.00
2008 16927.00 3586.00 31054.00 51567.00
2009 19547.00 41577.00 3626.00 64750.00
Source: BS Research/PRIME Database


“The government’s plan to divest its stake in public sector undertakings (PSUs) and a number of companies proposing to raise money via and IPOs will see a record fund mobilisation in 2010,” said Prithvi Haldea, managing director of Prime Database.
 
MONEY MARKET
Amount raised (in Rs crore)
Top 5 sectors 2009 2010*
Real estate 14,224 23,914
Power 14,746 18,400
Metal 2,790 16,000
Bank & finance 8,013 14,570
Engineering 2,771 7,740
Top 5 companies 2009 Top 5 companies 2010*
NHPC 6,039 Jindal Power 10,000
DLF 3,864 Emaar MGF 7,000
Adani Power 3,017 Reliance Infratel 5,000
Axis Bank 2,996 Sahara Prime City 5,000
Hindalco 2,790 Sterlite Energy  5,000
*Estimates                              Source: BS Research/PRIME Database

“A lot of prospectus have been filed with Sebi. There are companies that have raised capital and would be back next year. Besides, there are very few midcaps that have raised capital this year,” said Vedika Bhandarkar, managing director and head of investment banking at JP Morgan. She added that unlike 2009, when a large number of companies raised equity to reduce leverage, next year could see companies raising funds to fuel expansion and step up growth.

During 2009, 60 per cent, or Rs 39,183 crore, mobilised through sale of shares was used for repayment of debt contracted in previous years.

The data suggest that QIPs will continue to dominate fund-raising plans. Out of the 129 companies that have announced their intent to raise equity, 87 have indicated their preference for QIPs, while 42 IPOs are lined up for next year.

Similarly, Rs 1,02,000 crore, or over two-thirds of the fund-raising plans announced so far would be through QIPs. This year, 64 per cent of the equity raising was through QIPs.

“For listed companies, QIPs are a faster, cheaper and easier way of raising funds. Looking at the flow of liquidity from local and overseas investors, companies will find it easy to access capital,” said S Ramesh, chief operating officer, Kotak Investment Banking.

Merchant bankers and brokers said that with liquidity remaining high and risk appetite back in the market, companies would not face any hurdles provided the pricing is right.

“There is enough appetite and even liquidity for raising huge funds from primary market provided pricing is proper,” said Dharmesh Mehta, head of broking at Enam Securities. He added that huge fund-raising would provide plenty of choice to investors who could select between issues. “But valuations will play a key role in investment decisions,” he added.

Like 2009, the real estate sector would be the top issuer next year as well with fund-raising plans of Rs 23,914 crore announced so far. This is followed by power (Rs 18,400 crore), banks and finance (Rs 14,570 crore), engineering and infrastructure (Rs 7,740 crore), steel (Rs 7,865 crore), textile (Rs 6,710 crore), FMCG and trading (Rs 3,000 crore each) and refineries and sugar (Rs 2,000 crore each).

The flip side is that an active primary market could result in the secondary market remaining range-bound, especially when valuations were already high.

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