is smaller, several of these might be encouraged to do an initial public offering (IPO). So far this year companies have managed to pick up close to R8,000 crore and going by corporate announcements and board meeting resolutions an estimated R60,000-70,000 crore worth of issuances — by way of institutional placement — is in the pipeline.
Also on the cards are the residuary stake sales in Hindustan Zinc (HZL) and Balco, worth an estimated Rs 20,000 crore.
Investment bankers feel IPOs may take about six to eight months to hit the market given the documentation needed to be completed. “Several firms have initiated the process for IPOs and work will begin now. So clearly, you will see a lag of six to eight months between the market recovery and the IPOs,” Kotak’s Jayasankar explains.
Firms like Yes Bank, Idea Cellular, and KSK Energy have been among the 15 early birds to take advantage of bullish investor sentiments and raise equity capital in last three months. About twenty other companies, including HDFC Bank (which plans to raise Rs 10,000 crore of equity capital), IDBI Bank (Rs 4,000 crore), Larsen & Toubro (Rs 3,600 crore), and Indian Overseas Bank (Rs 3,600 crore), have already received board approval and have sought shareholders’ nod to proceed with fund raising.
“The 25% upswing in benchmark indices since early February this year has encouraged many companies to scout for equity capital to retire debt as well as expand capacities... Investors are also willing to participate given that sentiment will remain strong,” said Girish Nadkarni, MD of Motilal Oswal Investment Banking. Nadkarni believes that companies could raise about $10-12 billion excluding government divestitures and that fund raising will be dominated by infrastructure companies and banks, especially public sector banks. “Indian corporates have been encouraged by the positive sentiment. A new stable government at the Centre and expectations of higher economic growth have increased investors’ appetite,” said Ajay Saraf, ED and head corporate finance and institutional equities, ICICI Securities.
While some firms like Jaiprakash Power (Rs 3,000 crore), Future Retail (Rs 2,000 crore) and Indian Hotels (Rs 1,000 crore) will use most of the proceeds to pare debt, firms like L&T and Idea Cellular that generate strong cash flows too are raising equity to buy spectrum.
Benchmark indices have given positive returns to the tune of 25% since February this year, helping Indian markets the best performers globally,