Indian companies mop up more than cr 9 lakh through equity and debt pathways in 2021
Unless the ever-evolving Omicron situation plays a spoiler, next year should be a lot more robust in terms of fundraising activities and there doesn’t appear to be a shortage of funds, the experts said.
“Banks have been sitting on excess liquidity for some time and there should be enough appetite for quality borrowers,” said Ricky Kirpalani, Principal Sponsor, First Water Capital Fund.
Over the past year, fundraising through debt markets has fallen sharply, while equity fundraising has been robust and the bullish run of stock markets with liquidity all around has resulted in a lift. record funds through Initial Public Offerings (IPOs).
Also read: Highest Amount Raised Thanks to IPOs in 2021. See the list of blockbusters
Despite the plunge in debt fundraising, it continued to contribute a lion’s share of overall fundraising activity in 2021.
Debt fundraising slowed due to long-term economic disruption during the first wave of the coronavirus pandemic, followed by a prolonged impact of the devastating second wave, said Sandeep Bhardwaj, CEO, Retail, IIFL Securities.
On cumulative ??9.01 lakh crore raised through mid-December of this year with funds totaling ??5.53 lakh crore was wiped out from the debt market, ??2.1 lakh crore came from the stock market, ??30,840 crore via REITs and InvITs and ??1.06 lakh crore via the overseas route, showed data compiled by leading analytics database Prime.
In 2020, companies raised ??11 lakh crore, including ??7.91 lakh crore by debt and ??2.12 lakh crore through equity.
Explaining an increase in fundraising through the debt path in 2020, Samir Sheth, Partner and Head – Deal Advisory Services, BDO India, said the companies halted because a strict lockdown was imposed since March 2020 and to deal with the negative impact of the same. , companies have resorted to debt.
He further said the stock market was down for most of the year and the PE / VC markets were also not very active, leaving companies with few options other than debt financing. in 2020.
New capital has been raised by companies for debt repayment, to fund capital spending on new projects, to support inorganic growth like acquisitions, as well as for marketing and R&D purposes, Satyen said. Shah, Managing Director and Head of Investment Banking at Edelweiss Financial.
While businesses wanted the cash to overcome uncertainties surrounding the pandemic in 2020, much of this has been linked to economic growth in 2021 and businesses are raising funds primarily to grow, Sheth said.
Of the total ??5.53 lakh crore raised on Indian debt markets in 2021, ??5.38 lakh crore came from the private placement and ??14,277 crore were issued through public broadcasts.
“India’s debt markets are mainly exploited by financial sector companies which use funds for future loans (as the business cycle accelerates) and strengthen capital cushions,” said Ajay Manglunia, Managing Director and Head of Institutional Fixed Income, JM Financial.
The non-financial group deploys the funds primarily for general business expenses, capital spending and capital for inorganic growth opportunities, in addition to refinancing existing debt, he added.
In the equity market, funds came mainly from initial stock sales, as abundant global liquidity, a robust equity market and massive equity participation pushed the IPO market to new levels this year.
In the equity segment, the IPO route has helped companies raise ??1.2 lakh crore, Qualified Institutional Placement Route (QIP) added ??41,894 crore, issue of share rights to existing shareholders recognized ??27,771 crore, while the offer to sell (OFS) via the stock exchange mechanism contributed ??22,912 crores.
A total of 63 registered IPOs ??1.2 lakh crore and IPOs of small and medium-sized enterprises (SMEs) ??710 crores.
In comparison, ??26,613 crore was raked in through 14 IPOs on the motherboard, while ??159 crore came via the SME segment in 2020.
Vibrant stock markets and dramatic listing gains by some companies were the main factors behind the IPO frenzy, said Piyush Nagda Head-Investment Product at Prabhudas Lilladher.
Bhardwaj of IIFL Securities believes that the uptrend will continue in 2022 for the IPO market as well and that the new year could see a new record level of funds raised as the initial mega-sale of LIC shares is also underway. Classes.
Apart from public issues, equity fundraising via QIPs has fallen to ??41,894 crores in 2021 from ??84,509 crore last year, mainly due to the availability of cheaper debt and the expectation of high valuations due to rising markets, making promoters hesitant to dilute.
Another reason for the decline in QIP fundraising could be expectations of a further rise in the stock markets, with markets steadily rising from the start of the year until mid-November.
The number of PAQs in 2021 was higher than last year, but the quantum was relatively lower.
Going forward, Kriplani, of First Water Capital Fund, said fundraising through QIPs may accelerate as the investment spending cycle now picks up and valuations are rich.
The funds raised via the rights issue mode also plunged to ??27,771 crores in 2021 from ??64,984 crores last year. Bharati Airtel has contributed largely with its ??21,000 crore rights issued this year.
The year 2020 saw Reliance’s largest rights issue ever to the tune of ??53,000 crore, which makes this year pale in comparison.
However, the funds collected via the OFS channel – used for the dilution of the promoters’ participations – amounted to ??22,912 crore this year, from ??20,901 crores in 2020.
In addition, companies have adopted the mode of infrastructure investment trusts (InvIT) and real estate investment trusts (REITs) to raise funds and rake in funds. ??32,125 crore in the passing year, less than ??38,109 crores mobilized in 2020.
Apart from the interior route, funds totaling ??1.06 lakh crore was raised through the foreign bond and currency convertible bond (FCCB) markets, much lower than close to ??68,000 crore raised last year.
Going forward, experts believe that a robust financing scenario for Indian companies will continue until 2022 for equity and debt pathways.
“Given the high liquidity, the situation of Covid under control, the outlook for positive corporate earnings and overall growth in India. We expect investors to continue to seek funding for Indian companies.” said Shah of Edelweiss Financial Services.
According to BDO India’s Sheth, barring a significant economic impact from Omicron, the overall economic growth and significant funding scenario for Indian companies will continue through 2022.
Regarding debt, Bhardwaj of IFL Securities believes that significant fundraising through debt is likely to occur in the coming quarters as the economy is back on track and the economy is back on track. private investment plans are resuming. PTI SP BJ BJ
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