Indian companies are finding it increasingly difficult to raise funds overseas due to the subprime crisis in the US. The crisis triggered a sharp decline in overseas capital market offerings in August by domestic companies using American depository receipts, global depository receipts and foreign currency convertible bonds.
According to the Prime Database website, there were only three FCCBs in August. These had raised a total of Rs 3,946.35 crore compared with 10 FCCBs in July, raising Rs 5, 563.22 crore. In June 2007, there were eight issues that raised Rs 4,434.62 crore.
The crisis also hit ADRs and GDRs. There was not a single ADR or GDR issue by Indian companies in August, whereas July had seen a total of five GDRs that raised total Rs 5, 380.22 crore.
Earlier, the hardening of interest rates domestically had seen many mid- and small-sized Indian companies rushing to the overseas markets with their FCCB issues.
?Basically, August is not a month where we see huge fund raising. To add to that, global investors were not willing to take fresh positions as a result of high volatility witnessed in financial markets across the world. This has particularly impacted the ADR/GDR and FCCB issues of Indian companies. Also, the hardening of interest rates globally has taken a toll on the FCCB issues,? said S Ramesh, COO, Kotak Investment Banking.
Now, with the softening of interest rates globally, experts feel that FCCB issues will be back in action.