In less expensive credit routes, incompetent capital markets and the scramble to build a liquidity war chest to fight against financial plagues caused by pandemic saw Indian companies move near Rs 10 lakh crore through equity and debt in 2020. And the bullish path is expected to continue next year as well.
With most of the developed markets waking up with cheap credit, thanks to low interest regimes, organizations from emerging markets like India have embraced the low cost financing options.
The debt trend has turned more attractive to many Indian corporations for a number of reasons, including that there will be no weakening in the equity of promoters, according to experts.
“Locking norms and social speed have affected a large number of projects. Later, a large number of companies announced the expansion of new capacity and it is likely that a number of sub-project projects will start soon. , asset movement is expected to be higher next year, “said Arjun Yash Mahajan, Head of Institutional Business at Reliance Securities.
Out of the Rs 9.85 lakh crore garnered to December 15 this year, Rs 7.3 lakh crore was cut up from the debt market, Rs 2.46 lakh crore came from the equity market and around Rs 7,100 crore through the overseas route over, data compiled by analysts showed prime Database Prime.
Of the total Rs 7.3 lakh crore raised through Indian debt markets, Rs 7.23 lakh crore came from the private space and Rs 7,167 crore through public outflows.
V Jayasankar, Chief ED and CEO (ECM) at Kotak Mahindra Capital Company said a number of factors such as a faster recovery of the economy, positive developments on the face of the Covid-19 vaccine program, access to sufficient liquidity for markets that are Emerging, including India, would encourage companies to take advantage of unusual capital market conditions to fund growth plans and pull off their balance sheets next year .
In 2019, companies raised Rs 10.6 lakh crore, including Rs 7.28 lakh crore through debt and Rs 3.3 lakh crore through equity.
New capital was raised to fund growth as well as expansion plans, high cost debt refinancing and the creation of a liquidity war fund, and a large sum raised from Initial Public Grants (IPOs) was also raised for the public. promoters and shareholders through the sale of their holdings.
“More than any loans made in the last few months are by refinancing high-cost debt or creating a war fund of liquidity to use as demand comes back to the table,” Ajay Manglunia, Managing Director and Head of Institute-Based Revenue at JM Financial, said.
In addition, debt-preferred companies prefer it because it does not weaken the promoter’s share, thus preserving the interest, said Nikhil Kamath, Co-Founder and CIO of True Beacon and Zerodha.
In the equity market, most assets came from the issuance of shares to institutional investors and a rights issue approach such as unconventional stock markets and better valuations led companies to opt for pathways. so.
Within the equities segment, the Institutional Placement (QIP) route helped raise Rs 79,086 crore, the issue of share rights for existing shareholders accounted for Rs 64,984 crore, added IPOs Rs 26,472 crore, yielding for SMEs, favorable shares received Rs 39,484 crore shares and bid for sale (OFS) through stock exchange instrument Rs 21,256 crore. The share of FPO (Continue with public offering) was at Rs 15,024 crore.
14 mopped-up main board IPOs brought in Rs 26,313 crore, and Small and Medium Enterprise (SME) IPOs brought in Rs 159 crore. In comparison, Rs racked up 12,365 crore through mains IPOs, and Rs 624 crore through SME share in 2019.
In addition, Yes Bank took the continuous public offering (FPO) route to mop-up Rs 15,000 crore this year, while SME raised Rs 24 crore along the way.
“Several IPOs were already lined up before the economy felt the spread of a pandemic and had to postpone the lockout. As equity markets declined with better employment prospects and fiscal stimulus. offered by the government, IPOs began to see the interests of investors, “Mahajan said.
Kamath said retail investors have shown great interest in IPOs and this trend is expected to continue in 2021 as well.
The 2020 IPO card was led by SBI Cards and Payment Services which raised Rs 10,355 crore, followed by Gland Pharma (around Rs 6,480 crore), CAMS (Rs 2,240 crore) and UTI Asset Management Company (Rs 2,160 crore).
Interestingly, this year most IPOs opened with a base price above the case price reflecting strong investor desire. IPOs such as Route Mobile, Happiest Minds Technologies, Rossari Biotech and Gland Pharma totaled a whopping 40-200 percent profit from listing to investors.
In addition, IPO activity is expected to accelerate further in 2021 as investors are willing to invest in quality companies across multiple sectors, Jayasankar said.
In addition to public issues, equity gains through QIPs and rights issues combined hit a high of Rs 1.5 lakh crore backed by abundant liquidity access.
Fundraising through the QIP tool more than doubled to Rs 79,086 crore this year from Rs 35,238 crore through the method in 2019.
Fundraising through the QIP route in 2020 was largely controlled by financial institutions and banks. Major QIPs distributions included ICICI Bank raising around Rs 15,000 crore, Bharti Airtel (over Rs 14,000 crore), HDFC (Rs 14,000 crore), Axis Bank (Rs 10,000 crore) and Kotak Mahindra Bank (Rs 7,442 crore) .
Jayasankar said ‘COVID capital’ was being built across regions.
Capital raised in the last quarter has been referred to as “COVID capital” where raised equity has been used to strengthen the balance sheet to overcome any financial pressures as a result of Covid- 19 and also to take advantage of the growth opportunities available.
In addition, transferring companies put Rs 64,984 crore through a rights issue this year, which was higher than the Rs 52,053 crore raised in 2019.
Reliance Industries put the lion’s share, with its Rs 53,124 crore through a rights issue. It was also the biggest rights issue ever in the country.
However, capital issued through a favorable case of equity shares was reduced to Rs 39,484 crore in 2020 from Rs 2.04 lakh crore in the previous year. Also, fundraising through the OFS route – used to weaken promoter holdings – fell to Rs 21,256 crore this year from Rs 26,000 crore in 2019.