Four major Indian companies have raised over Rs 12,200 crore through the issue of global and American depository receipts (GDRs and ADRs)?the securities that Indian corporates used in a big way to bankroll their expansion in the first flush of liberalisation in the nineties?in the last fortnight, signaling the end of the drought in overseas fund raising activity. This also marks a clear shift from the qualified institutional placement (QIP) route that has been the favoured instrument for Indian corporates for some time now.
?There has been a fair amount of pent up demand among companies to raise capital,? said Devinijit Singh, managing director, Carlyle Group. ?The successful fund raising indicates the return of risk appetite among global investors as well as the demand for Indian papers.?
The amount raised through ADR/GDR is quite close to the Rs 12,500 crore that as many as 13 companies raised from the overseas market through QIPs in the entire 2009. Interestingly, the majority of the recent QIPs were subscribed by FIIs; it goes without saying, India Inc has moved in fast to capitalise on the foreign investor interest as much as possible.
According to an investment banker who was part of one of the issues, with debt expensive, many more companies are planning to tap the overseas market, though the appetite is only for companies that have sound fundamentals.
While the success of the latest round of overseas fund raising points to the improved liquidity in the global markets, experts also point to the fact that global investors are now more guarded towards currency risk.
Deven Choksey, managing director, KR Choksey Securities, says, ?The success of the GDR and ADR issues shows that overseas investors are more comfortable parking their money in their home country than in an overseas market to avoid risks associated with sharp currency fluctuations.?
Since Indian markets trade at a slightly higher premium, investors feel more comfortable in subscribing to the issue at a lower price in the home market, according to an investment banker.
At the end of the day, the success of a global issue, like any other, will depend on a company?s growth prospects, visibility and the valuation at which it makes the offer to potential investors.