Stock market volatility to impact India Inc's fundraising plans: Analysts

The uncertainty in the secondary markets is likely to cast a shadow on the primary market activity as well over the next few months, said analysts, who believe India Inc will either delay listing or alter its fundraising plans. Thus far in calendar year 2022 (CY22), initial public offers (IPOs) of 16 companies have hit the Street and have raised a total of Rs 40,311 crore  till May 2022, Prime Database data show. 

“Unless absolutely necessary, promoters will defer their fund raising requirements for the time being as debt is getting more expensive and their equity will not fetch them the price it would have six months ago. On aggregate, corporate India might be in a wait and watch mode unless absolutely critical,” said Rahul Arora, chief executive officer for institutional equities at Nirmal Bang.

The biggest fund raise of them all via the IPO route was the offering of Life Insurance Corporation of India (LIC), which garnered over Rs 20,000 crore from the primary market. However, the stock has languished since then, falling around 28 per cent till date since its listing in April 2022.

In the past six months, fears of tightening monetary policy by global central banks to tame inflation, Russia-Ukraine war and its impact on commodities, especially especially crude oil has seen leading some equity indexes across the globe slip into a bear phase (fall of over 20 per cent from the peak levels). The S&P BSE Sensex and the Nifty50, too, have lost around 7 per cent each during this period.

Rising rates

Rising interest rates, too, do not augur well for corporate India as they will make raising money via debt expensive. That said, the silver lining, according to Jyotivardhan Jaipuria, founder & managing director, Valentis Advisors, is that debt level of India Inc is very low. On the margin, he believes, there could be some companies that may slow-down their capex program, partly due to fears of a slowing economy and partly due to difficulty in raising equity. 

“One section of India Inc we would worry about is the new-age companies where companies we making cash losses and were relying on private equity funds to fund these losses. We think a risk-odd environment could hurt many of these start-up companies and they will be forced to cut costs drastically to survive in a tougher equity environment,” Jaipuria said.

According to a recent note by Prime Database, 52 Indian corporates raised Rs 1.11 trillion via IPOs in fiscal 2021-22 (FY22). For FY23, it had pegged this fund raise at a massive Rs 1.4 trillion, including the LIC IPO. A total of 54 companies, Prime Database said at the start of this fiscal, held market regulator Securities and Exchange Board of India's (Sebi's) approval for the fund raise. Another 43 companies, the note said, were looking to raise about Rs 81,000 crore where Sebi approval was still awaited.

28 companies, according to Prime Database mobilized Rs 28,460 crore through qualified institutional placements (QIPs) in FY22, which was 64 per cent lower than Rs 78,045 crore raised in FY21. "The largest QIP of FY22 was from Macrotech Developers raising Rs 4,000 crore, accounting for 15 per cent of the total QIP amount. QIPs were dominated by bank, financial services and real estate companies with them accounting for 61 per cent (Rs 17,400 crore) of the overall amount," the Prime Database note said.