India Inc on record fundraising spree

~62,000-crore IPOs filed with Sebi; QIPs near all-time high in 7 months

India Inc is embarking on a record fundraising spree, bolstered by a sustained rally in the stock market and the flood of money sloshing around with domestic and overseas institutional investors. More than 150 companies have expressed their intent to raise capital amounting to an estimated ~2.5 lakh crore by way of initial public offerings (IPOs), qualified institutional placements (QIPs), and follow-on public offerings, the data collated from Prime Database, a primary market tracker, show. Nearly 60 per cent of this amount may be raised by companies belonging to the BFSI (banking, financial services and insurance) space. Of the more than 150 companies, 94 may hit the market with IPOs totalling nearly ~1 lakh crore in the coming months. HDFC Standard Life Insurance (estimated issue size ~10,000 crore), General Insurance Corporation of India (~10,000 crore), the National Stock Exchange of India (~10,000 crore), New India Assurance (~7,000 crore), and SBI Life Insurance (~7,000 crore) will be among the larger issuances. While all these companies may not come up with their IPOs this calendar year or even this fiscal year, 26 companies have already filed their offer documents with the Securities and Exchange Board of India (Sebi) for offerings worth ~62,000 crore, and at least half of this amount is likely to be raised this calendar year, say market observers. “This may be the best year for capitalraising,” said Pranav Haldea, managing director, Prime Database. “The stock market remains buoyant and the coming months may see several companies backed by private equity and venture capital investors tap the primary market for an exit.” India remains one of the best-performing markets in the world this year, with the benchmark BSE Sensex rallying 18.6 per cent, and the 50-share Nifty gaining 20.4 per cent in the year-to-date.

“The rush from companies belonging to newer sectors such as insurance, asset management and logistics, coupled with the abundant liquidity, is driving the record fundraising spree,” said Utpal Oza, managing director & head-investment banking, Nomura India.

Eleven insurers are expected to hit the market with IPOs worth ~45,000-50,000 crore in the coming months.

“We expect the offerings from the BFSI and logistics space to get a good response from investors, as these companies are more India-centric, and less dependent on the external global environment, leading to greater visibility in their earnings and revenue growth,” said Oza.

The government also aims to hit the market with several IPOs in the coming months to meet its disinvestment target. These include at least nine railway public sector undertakings (PSUs), five insurance companies and four defence PSUs.

Public sector banks are leading the race to raise money through QIPs. Just like in early 2016, investor appetite for fresh equity issuances, however, is likely to be lukewarm, say experts. While market conditions and liquidity are better than last year, investors will be willing to put money only if they see a credible turnaround plan in terms of capital infusion, bad loan resolution and management appointment.

In June, India’s largest lender State Bank of India raised ~15,000 crore through this route. Kotak Mahindra Bank and YES Bank were the other two major banks that raised capital through QIPs.

With 17 offerings raising a little over ~34,000 crore in just seven months, fundraising through institutional placements will surpass the QIP record of ~34,676 crore set in 2009. Besides banks, Bajaj Finance and Piramal Enterprises may tap the market this year with ~4,000-crore plus QIPs.

Despite the excess supply, experts do not see any immediate challenges in the near- to medium-term as far as demand for the offerings is concerned. India remains a bright spot among emerging markets prompting overseas investors to be net buyers of Indian shares. Domestic mutual funds are flush with funds from record inflows through monthly systematic investment plans.

“There is enough investor appetite among both domestic and overseas investors. As long as the company fundamentals are sound, the sector is performing well and the pricing is reasonable, there will be enough takers for the offerings,” said Haldea.

Foreign portfolio investors have shopped for equities worth ~47,000 crore, while domestic institutions have bought shares worth ~38,500 crore year-to-date.

The govt aims to hit the market with several IPOs in the coming months to meet its disinvestment target. These include at least nine railway PSUs, five insurance firms and four defence PSUs