Adani Enterprises outlier as equity raising by India Inc declines

The listed non-financial companies raised fresh equity capital worth Rs 1.6 trillion in FY22 down 57 per cent from FY21

Adani group flagship Adani Enterprises has announced plans to raise fresh equity capital worth Rs 20,000 crore later this year, which is one of the biggest by corporate India.

At macro level, however, fundraising is going down owing to a lack of big capital expenditure (capex) by companies, besides a jump in corporate profits in the last two years.

Fresh equity raising by the country’s top listed companies declined sharply in FY22 after a busy FY21.

Listed non-financial companies raised fresh equity worth Rs 1.6 trillion in FY22, down 57 per cent year-on-year (Y-o-Y) from an all-time high of Rs 3.74 trillion in FY21.

The numbers suggest FY16 was the busiest year for fundraising when all listed companies together cranked up nearly Rs 2.5 trillion of fresh equity capital.

FY18 was another busy year when listed companies rang up fresh equity capital worth Rs 2.45 trillion (see the adjoining charts).

Companies’ internal accruals or cash profits were up 24.3 per cent Y-o-Y to record a high of Rs 11.34 trillion in FY22 compared to Rs 9.12 trillion a year ago and Rs 8.1 trillion in FY19, which was before the pandemic.

The analysis is based on the annual consolidated balance sheets of a constant sample of 955 non-financial companies that are part of the BSE500, BSE Mid-Cap and BSE Small-Cap indices.

It excludes the listed subsidiaries of other listed companies in the sample.

Reliance Industries Ltd (RIL) has been the biggest fundraiser in recent years, followed by Adani Group companies.

RIL accounted for 54 per cent of the money raised by all listed companies in FY21. It raised nearly Rs 2.01 trillion worth of fresh equity capital through a mix of a rights issue and stake sales in its telecom and e-commerce arm Jio Platform.

RIL had cumulatively raised fresh equity capital worth Rs 2.85 trillion between FY19 and FY21, accounting for 37.5 per cent of all equity fundraising by listed companies in the period.

Telecom operators Bharti Airtel and Vodafone Idea have done big-ticket equity issuances between FY18 and FY20 to pay for the adjusted gross revenue (AGR) dues to the central government.

The planned follow-on offer by Adani Enterprises will lead to a big step-up in equity fundraising by the group compared to its past trend. According to the data from Capitaline database, the six Adani group companies, excluding Adani Wilmar, which listed in February this year, raised fresh equity capital worth Rs 9,037 crore in FY22, up 60.5 per cent year-on-year (Y-o-Y) from Rs 5,632 crore a year ago.

Excluding RIL and Adani group companies, there has been a general decline in fundraising by the rest of the listed non-financial companies. The other listed companies together raised fresh equity capital worth Rs 1.35 trillion in FY22, down from the Rs 1.62 trillion in FY21. Fundraising by other companies (ex-RIL and Adani group) in FY22 was 45.2 per cent lower than the record high of Rs 2.46 trillion in FY16.

On fund usage, companies raised equity capital to prepay debt and de-leverage their balance sheet rather than increase their capex. The combined capex or the changes in gross block by listed companies (ex-RIL and Adani group) in FY22 at Rs 4.84 trillion was the same as in FY15 and down 29.3 per cent from a high of 6.84 trillion in FY20.

In comparison, there has been a steady rise in debt prepayment in the last 10 years. Listed companies (ex-RIL and Adani group) reduced their debt by Rs 1.98 trillion in FY22, down 18.4 per cent from FY21. It more than doubled from around Rs 93,600 crore in FY19 and up sharply from Rs 35,321 crore in FY13.

RIL utilised nearly 40 per cent of the equity receipts in FY21 to prepay debt. The company cut its debt by nearly Rs 79,500 crore in FY21 on a consolidated basis. In comparison, the company has cumulatively spent Rs 3.01 trillion, including Rs 53,000 crore in FY21, on capex in the last three years.

Adani Group companies are largely using the equity proceeds to raise their capex. The group companies have cumulatively made capex worth Rs 1.46 trillion in the last three years against Rs 6,233 crore spent on debt reduction.