New Delhi: The stock market recovery may have reached only its half-way mark, but companies’ confidence level for raising funds through sale of shares seems to have already hit a new peak as they have lined up plans to mop up capital in excess of Rs1,00,000 crore.
This include an estimated Rs40,000 crore being eyed by public sector firms through IPOs or rights issues, over Rs40,000 crore by non-PSU companies through private placement of shares and about Rs20,000 crore by private sector IPOs.
Besides, many companies have announced intentions for raising funds through this route, but there are no words on the size of their targeted funds.
On the flip side, warning bells have already started ringing as experts are cautioning that the market may not have yet got an appettite for such massive capital raising plans, especially when global economy was not out of the woods.
Global financial services major JPMorgan has said in its new India equity strategy report that improving investor sentiment has led to a surge in equity fund-raising plans.
It, however, warned that global risk appetite needs to remain supportive as overseas investors were expected to fund a substantial part of the planned issues.
The revival of fund raising plans coincide with a sharp recovery in the stock market, where the benchmark Sensex has regained 15,000-point mark after dipping below 8,000 points in October last year.
But, the Sensex is still far away from its peak of over 21,000 points scaled in January 2008.
But plans are being announced almost on a daily basis for raising funds through various routes, including IPOs, strategic stake sales and private placement of shares with domestic and overseas institutional investors.
While about Rs10,000 crore have already been raised in the recent past by a clutch of companies, such as realty majors DLF, Unitech and Indiabulls Real Estate through sale of shares to institutional investors, further plans for raising over Rs40,000 crore through this route have been announced by 24 more companies.
This includes about Rs25,000 crore being eyed by realty firms and over Rs15,000 crore in the other sectors.
But on top of the tally, the market is anticipating fund raising plans worth about Rs40,000 crore by the PSUs.
While about Rs20,000 crore is estimated to be raised through issue of fresh shares or divestment of the government’s stake in various PSUs, another Rs20,000 crore is being eyed by the country’s largest bank SBI alone through sale of shares to its existing shareholders.
SBI Chairman O P Bhatt recently said: “SBI plans to raise Rs 20,000 crore in this financial year, preferably in the form of rights issue, and will submit a proposal regarding this to the new government at the Centre.”
Central Bank of India has also said it was discussing various options to augment its capital and a rights issue could be an option, although it has no firm proposal as yet.
The PSUs, whose public offers are being talked about include Oil India, NHPC, Coal India, RITES and IRCON International.
There are also about 25 public sector enterprises, recommended by the disinvestment committee as potential divestment targets, while some PSEs were earlier identified for disinvestment but the process was later called off.
The Planning Commission deputy chairman Montek Singh Ahluwalia has also said there was a lot of scope of fund raising by diluting the government’s stake in unlisted PSEs.
A mega IPO by PSU telecom major BSNL, with estimated targeted proceeds of Rs40,000 crore, is also in the pipeline, but no decision has been taken on this front.
The IPO was put on backburner last year after opposition from employee unions, but there are indications that talks may begin between management and union for revival of the IPO.
Among non-PSUs also, over 30 IPOs were deferred last year due to adverse market conditions, but some of them are already being revived and more could follow soon.
Collectively, these were looking to raise over Rs30,000 crore through sale of shares last year, but the target is estimated to be slashed to about Rs20,000 crore due to changed market scenario. For example, Adani Power was looking to raise over Rs5,000 crore through IPO last year, but now it is looking to raise about Rs2,500 crore.
Other major IPOs that were deferred last year include those of commodity exchange MCX, mutual fund house UTI AMC and Anil Ambani group’s Reliance Infratel.
While there is no word on revival of IPO of Reliance Infratel, which last year was targeting Rs6,000 crore through the offer, it is currently looking to raise about Rs5,000 crore by sale of shares to some private equity firms.
Reliance Life Insurance, also part of the same group, has said it is looking to sell 26% shares and the options being explored include a strategic sale, IPO or a combination of both in next few months.
Another group firm, RCOM is also looking to raise funds through a qualified institutional placement, but there is no word on the size or timing of the deal. The primary markets have revived meaningfully over the last two months, on the back of an improvement in global investor sentiment and risk appetite.
It further said a decisive poll verdict in favour of the ruling UPA has further “emboldened a funds starved Corporate India to announce substantial equity raising.”
However, the key issue remains the need for sustained buoyancy in global investor sentiment and risk appetite as “India remains a capital deficient economy and a substantial portion of the fund raising planned will have to be raised from foreign investors,” it added.