In­dia Inc Hits the Money Trail

Debt-heavy cos likely to be first to take ben­e­fit of im­proved sen­ti­ment

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The prospect of a new govern­ment at the Cen­tre, driv­ing busi­ness and re­forms, has sparked life among in­vest­ment bankers as many In­dian com­pa­nies re­new their plans to raise money from both lo­cal and over­seas mar­kets in an­tic­i­pa­tion of a bet­ter busi­ness cli­mate. “We have a man­date from seven In­dian com­pa­nies to raise at least $2 bil­lion from qual­i­fied in­sti­tu­tional in­vestors un­der the Qual­i­fied In­sti­tu­tional Place­ment scheme,” says a man­ag­ing di­rec­tor of a global in­vest­ment bank. “There's tremen­dous ap­petite from in­vestors across the globe for In­dian pa­pers, but the suc­cess of the is­sue will de­pend on the time and is­sue price.” Last year, the bank had very few man­dates. At least eight com­pa­nies, in­clud­ing two lo­cal pub­lic sec­tor banks, a pri­vate sec­tor bank, an auto com­po­nent maker, two non-bank­ing fi­nance com­pa­nies and two in­fra­struc­ture de­vel­op­ers have an­nounced plans to raise money through the QIP route while 165 com­pa­nies have re­ceived ap­proval from their share­hold­ers to raise funds pri­mar­ily through the QIP scheme. On Tues­day, mi­cro­fi­nance lender SKS Fi­nance opened its QIP book to raise .` 400 crore. In­dia’s largest auto com­po­nent maker Amtek Auto, which has re­ceived an ap­proval to raise money though QIP, is now fi­nal­is­ing a clutch of in­vest­ment bankers to man­age the fund-rais­ing, people fa­mil­iar with the de­vel­op­ment said. It is also look­ing to raise money through its Sin­ga­pore-based hold­ing sub­sidiary. Amtek Group chair­man Arvind Dham con­firmed the de­vel­op­ment, but said the plan is at a very pre­lim­i­nary stage. “We are yet to take a call on rais­ing funds. We have passed a res­o­lu­tion in the com­pany board to move ahead and are work­ing in the right di­rec­tion,” he said. For­eign in­vestors’ hope of bet­ter gov­er­nance has im­proved mar­ket sen­ti­ment, and they are tak­ing a long-term view on In­dia, say bankers. “In­dia is not ex­pen­sive in a twothree year re­view, so in­vestors will take a long-term view,” says Pramod Ku­mar, man­ag­ing di­rec­tor at Bar­clays, a for­eign bank. “Many com­pa­nies who were sit­ting on the fence have started dia­logues to raise money.” Last week, In­dia’s No 3 mo­bile tele­phony com­pany Idea Cel­lu­lar, owned by bil­lion­aire Ku­mar Man­galam Birla, has be­gun a non-deal show to as­sess the ap­petite of for­eign in­vestors af­ter re­ceiv­ing ap­proval from share­hold­ers to raise roughly .` 3,000 crore in Septem­ber last year. “The pipe­line has im­proved and the re­cent mar­ket rally has given In­dia

Some in­fra com­pa­nies are also ex­plor­ing the fund-rais­ing op­tion as they be­lieve that the Naren­dra Modi-led govern­ment will fo­cus on in­fra de­vel­op­ment

Inc an op­por­tu­nity to tap the mar­kets,” says a Mum­bai-based banker. “But it's still not like post-2009 when ev­ery in­vest­ment bank had 5-6 man­dates. Now, it’s a lot less, but things are at least mov­ing.” On Wed­nes­day, Jin­dal Steel & Power, owned by bil­lion­aire and for­mer par­lia­men­tar­ian Naveen Jin­dal, said the com­pany is seek­ing its share­hold­ers ap­proval to raise its bor­row­ing limit to .` 50,000 crore. The plan also in­cludes the steel maker’s plan to raise .` 10,000 crore by is­su­ing non-con­vert­ible deben­tures. “Our pipe­line is build­ing up and there's lot of in­ter­est from com­pa­nies to raise money,” says Chetas De­sai, chief ex­ec­u­tive, Am­bit Cor­po­rate Fi­nance, an in­vest­ment bank. “The ac­tion in the sec­ondary mar­ket and re-rat­ing of val­u­a­tions should en­cour­age more com­pa­nies which have been wait­ing for an op­por­tu­nity to raise fresh cap­i­tal.” The BSE Sen­sex has risen by 1.6% in the past four trad­ing days af­ter the BJP won the man­date to form the next govern­ment. The BSE small cap in­dex rose by 12.4% and mid cap in­dex by 9.2%. “This is a more dis­cern­ing mar­ket. Un­like 2009, in­vestors won't paint Unitech, GMR and L&T with the same brush,” added an­other banker on the con­di­tion of anonymity. Com­pa­nies en­gaged in build­ing power plants, ports and roads will be the first to kick-start fund-rais­ing through QIPs, and then through pub­lic of­fers. On Mon­day, Jaiprakash Power Ven­tures an­nounced its plans to raise up to .` 3,000 crore to fund its cap­i­tal ex­pan­sion and re­duce debt. The com­pany, which has a debt of .` 17,561 crore, is ex­plor­ing a mix of QIP and ex­ter­nal commercial bor­row­ing pro­grammes and plans to wrap up the ex­er­cise within the next cou­ple of weeks. Road de­vel­oper BF Util­i­ties, which built the Ban­ga­lore-Mysore road, is in talks with bankers to raise money. Some bankers say com­pa­nies will first use the QIP scheme as they can raise money quickly rather than the time-con­sum­ing pub­lic of­fers. “The QIPs have a lower ges­ta­tion pe­riod be­tween five and six weeks, while the pub­lic IPOs take about 6-9 months,” says Nipun Goel, pres­i­dent and head, in­vest­ment bank­ing, IIFL, a lo­cal bro­ker. “We be­lieve that there’ll be a lot of ac­tiv­ity on the QIP front in the next few months while the sec­ond half of the year shall wit­ness a very ro­bust IPO is­suance.” Some in­fra­struc­ture com­pa­nies are also ex­plor­ing the fund-rais­ing op­tion as they be­lieve that the Naren­dra Modi-led govern­ment will fo­cus on in­fra­struc­ture de­vel­op­ment. “We be­lieve that in­fra­struc­ture will grow and com­pa­nies may tap the cap­i­tal mar­ket to raise funds,” says GVK Reddy, founder chair­man and MD, GVK Group, which owns the Mum­bai, Ban­ga­lore and Hy­der­abad air­ports. “We don’t have a fund-rais­ing plan im­me­di­ately, but we will def­i­nitely ex­plore all op­tions, in­clud­ing eq­uity in In­dia. But we would like to watch things for a while be­fore tak­ing a de­ci­sion,” he added. Some com­pa­nies have plans to raise money from its ex­ist­ing share­hold­ers as well as fresh in­vestors. The Tata Group-owned In­dian Ho­tels Com­pany (IHCL), which owns the Taj Group of ho­tels, will raise .` 1,000 crore from its ex­ist­ing share­hold­ers through a rights is­sue and has sought ap­proval from the mar­ket reg­u­la­tor Sebi to raise .` 1,000 crore more by is­su­ing com­pul­sory con­vert­ible deben­tures.

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