Mumbai: Indian firms may sell shares worth up to $30 billion annually over the next three years as the return of economic growth draws investors back to Asia’s third-largest economy, a senior official at Morgan Stanley said.
That would match the record $31 billion raised by Indian firms in 2007, the final phase of a five-year bull run that saw the main share index rise sixfold.
“India is a trillion dollar market-cap country, and in such a growing market it is not unreasonable to expect equity issuance of 2 to 2.5% of that every year,” Gokul Laroia, managing director of Morgan Stanley Asia, said in an interview on Wednesday.
Indian shares sales totalled $7 billion in 2008, with many offers pulled as the share market plunged by more than half.
Shares sales have reached $2.6 billion so far in 2009, Thomson Reuters data showed. Most of the sales have been in the past month as the stock market has surged from its 2009 lows hit in early March. At Wednesday’s close, the market was up 85% from its 6 March low.
The preferred route has been sales to institutions, with top real estate firm DLF raising $780 million through a stake sale by its founders in May.
Morgan Stanley was the sole arranger for Indiabulls Real Estate’s $556 million share sale last month to institutional investors, and it had a solid pipeline in India, Laroia said without elaborating.
“India funds a large portion of its growth through external resources. Investors are very positive on the country after big issues such as the election verdict exceeded expectations,” he said.
Foreign investors have bought a net $4.6 billion worth of stocks so far in 2009, a sharp reversal from record outflows of more than $13 billion seen last year.
India’s ruling coalition was re-elected last month with an increased mandate that has raised expectations it can push ahead with delayed reforms and sales of stakes in government firms.
“As they look beyond the current market rally, investors will be focused on issues that India still needs to resolve. Divestments, pension reform, and reforms in the financial services and insurance sectors, among others,” said Laroia.
Following the election, Morgan Stanley raised India’s growth forecast to 5.8% from 4.4% in the fiscal year ending March 2010.
“India can actually outperform at the margin versus the rest of Asia as it has a more balanced economy,” Morgan Stanley Asia chairman Stephen Roach told an earlier media conference, referring to India’s limited reliance on exports.
He said for the first time in 12 years he was more optimistic on India than China, as the latter had pushed its export-led model too far and left itself too dependent on external factors.