India Inc Hits the Money Trail
Debt-heavy cos likely to be first to take benefit of improved sentiment
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.