Indian firms set to tap equity market

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Indian firms set to tap equity market
Mumbai: Analysts' prediction that the recession is about to bottom out and the economy is all set to bounce back, coupled with the rising stock markets has started prompting Indian firms to scout for investment from the capital market, say investment bankers. They estimate that the companies could be looking to raise $6-9 billion (Rs29,700-44,550 crore) from the equity market in the next few months. However, firms differ in choosing ways of fundraising. Some listed companies want to raise funds through so-called qualified institutional placements (QIPs), while others are contemplating rights issue. At the same time some listed and unlisted firms are considering private placement of equities or initial public offerings (IPOs). In QIPs, promoters of firms issue shares to institutional buyers and retail investors are not involved. "Companies are starting to think about raising money from capital markets. Clearly the markets have seen a partial resurgence and companies that show initial interest will follow with at least a draft prospectus," said Ranu Vohra, Managing Director and Chief Executive of local investment bank Avendus Capital. Vohra anticipates companies to raise about Rs40,000-45,000 crore this year, including a potential Rs 20,000 crore rights issue by State Bank of India, the country's largest lender by assets. A report from the local research arm of the Credit Suisse Group published on 6th May says Indian firms are planning to raise at least $6 billion in the next few months. This includes a $1 billion equity issuance by Tata Steel. Besides, Jaiprakash Associates is raising some $600 million mainly through non-convertible debentures and Indiabulls Real Estate Ltd another $600 million, through QIPs. This estimate also includes about $325 million raised by real estate company Unitech three weeks ago and a revival in the share sale plans among Adani Power, National Hydro Power and Oil India. At least 60 Indian companies had deferred their share sale plans after filing offer documents with Sebi due to the terrible uncertainties in the market. A company planning to enter the market is required to file a draft prospectus with the capital market regulator, Securities and Exchange Board of India (Sebi), at the first stage. A Bloomberg report says that 34 Indian companies raised Rs18,300 crore through IPOs in 2008, a 45.96 percent drop from the Rs33,800 crore raised from 89 IPOs in 2007. And also, money raised through QIPs route dropped 83.26 percent to Rs3,700 crore in 2008, from Rs22,100 crore in 2007. However, there has been a dramatic improvement in sentiment, with lead indicators such as money supply, bank credit, foreign exchange reserves, foreign fund inflows and companies' inventories showing a positive trend. Some institutions such as Swiss investment bank UBS AG are predicting a turnaround as early as June. "The secondary market is a lead indicator," said S. Subramanian, head of investment banking at Enam Financial Consultants. "The recent rally has brought some cheers to investors and companies in terms of valuations," he added. After falling 52 percent in 2008, the Sensex, the Bombay Stock Exchange's bellwether equity index, has risen 25.6 percent this year. Since 9 March, the start of the current rally, which some investment gurus such as Mark Mobius of Templeton Asset Management and Anthony Bolton of Fidelity International term as the next bull run, the Sensex has gained 48.48 percent, the most among emerging markets. It index gained 1.37 percent, or 164.19 points, at 12,116.94 on Thursday.

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