Fund raising will not be easy for Indian companies

By SiliconIndia   |   Wednesday, 23 January 2008, 11:49 Hrs
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Mumbai: The choppy market situation and sinking valuations may put some of the Indian companies in a difficulty to raise funds for their mega projects, say analysts and consultants.

While some companies will be forced to swallow a lower valuation, others may have to offer incentives such as additional shares, in order to raise money. Over the next five months, Indian companies are likely to raise over $12 billion via a mix of equity, rights and debt issues, reported The Economic Times.

Most of the money will be used to build power plants, refineries, retail networks and bank branches. "They have to offer more equity to raise required capital. Even if they do so, one is not sure if they can raise the funds because of a conspicuous dearth of funds in the equity as well as the debt markets across the globe," said Ashok Wadhwa, CEO and partner, Ambit Corporate Finance.

Though things stand so, some companies are planning to raise money for different projects. While Tata group plans to raise funds for acquisitions and capital expansion in steel, tea, chemicals, auto, IT and hospitality segments, the Essar group will raise funds for refinery expansion, vessel acquisitions and power plants construction. The Aditya Birla Group firms, Hindalco Industries and Aditya Birla Nuvo, also have similar plans.

Even those companies who prefer private equity to markets, valuations could play spoilsport; private equity fund managers are likely to demand a fair and reasonable valuation.

As the on-going carnage is expected to delay some of the plans, there could be an increase in the number of PE deals in the domestic market.

"If the market continues to be choppy, the companies would have to revisit their expectation on valuations. Because, the investors may not agree with the projections of corporates," said a senior official from Ernst & Young.

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