Companies mop-up Rs 71,300 cr in FY14; debt market most preferred

Funds raised primarily for business expansion and meeting capital requirements

Indian firms raised a staggering Rs 71,300 crore in 2013-14 with debt market emerging as the most preferred route for garnering capital to meet business needs.

According to a report by Prime Database, they mopped-up Rs 71,370 crore through public markets during the financial year ending today, showing a surge of 13% from Rs 63,056 crore garnered 2012-13.

The funds were raised through various routes such as initial public offer (IPO), follow-on public offer (FPO), offer-for-sale (OFS), Institutional Placement Programme (IPP) Qualified Institutional Placement (QIP) and bonds.

The funds were raised primarily for business expansion and meeting capital requirements.

While there was a lull in the primary market where firms raised funds through the sale of shares via IPOs and FPOs, it was the bond instrument that was used the most in 2013-14.

"The year could have been much better had several PSU divestments, originally slated to be done via public offers, not been made through alternative routes (such as buyback, block deals, cross holding, ETFs etc and also if there was lower volatility in the secondary market through most of the year," Prime Database Managing Director Prithvi Haldea said.

Out of the Rs 71,370 crore garnered, Rs 41,989 crore was raked in through bonds and the remaining Rs 29,381 crore via equity segment.

The bond market was initially monopolised by NBFCs but towards the later part of the fiscal, investors also saw tax free bonds being issued from state-owned firms.

There was a lull in the equity market in the current fiscal as there was only one big ticket IPO and two FPOs during 2013-14.

Just Dail, search engine service provider, was the only big IPO that raised Rs 919 crore. Power Grid FPO raised Rs 6,959 crore, while Engineers India garnered Rs 497 crore.

In addition, there were 37 SME (Small and Medium Enterprise) IPOs which raised Rs 286 crore.

Haldea said there was some negative sentiment because IPOs of Scotts Garments and Loha Ispaat had to be refunded, while 21 companies holding approvals of market regulator Sebi's to raise Rs 6,673 crore were allowed it to lapse.

He said: "Unstable economic climate in the country, coupled with a volatile secondary market, almost through the fiscal year resulted in a very bad year for IPOs."

A total of Rs 6,859 crore was raised via OFS mechanism and another Rs 4,459 crore through IPP route.

These two routes were allowed by Sebi primarily to help promoters of already-listed companies comply with the regulator's 25% minimum public shareholding norm.

Besides, six QIPs managed to raise Rs 9,402 crore from institutional investors. State Bank of India's QIP made up 85% of this amount.