Indian companies have raised nearly Rs 6 trillion from equity and debt instruments in 2018, but volatile market conditions brought down the kitty by 30 per cent and political uncertainties ahead of the 2019 general elections may again cast a shadow on fund-raising activities in first half of the new year.
Experts, however, are hopeful the fund-raising will gather steam in second half of 2019 with a pick-up in the overall investment climate.
The data shows the debt market remains the most preferred route for raising funds to support business needs of the corporate world.
Out of the cumulative Rs 5.9 trillion garnered so far this year from capital markets, a large chunk or Rs 5.1 trillion has been mopped up from the debt market and the remaining amount of about Rs 78,500 came from equity markets, figures compiled by data analytics major Prime Database showed.
In 2017, firms had raised Rs 8.6 trillion, including nearly Rs 7 trillion through debt markets and Rs 1.6 trillion from equities.
In equity market, funds mostly came from initial public offers (IPOs) and issuance of shares to institutional investors.
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The final figures may go up to end the year at around Rs 6 trillion for debt and equities, experts said.
The funds have been raised mainly for business expansion plans, loan repayments and to support working capital, while a large amount raised from IPOs also went to the promoters, private equity firms and other existing shareholders for part or full sale of their investments.
"Lack of corporate lending appetite by PSU banks combined with attractive yields in the corporate bond markets over bank rates appear to motivate corporates to shift towards market based borrowing through non-convertible debentures (NCD) issuances for raising funds," WGC Wealth Chief Investment Officer Rajesh Cheruvu said.
Rajendra Naik, MD (Investment Banking) at Centrum Capital said the later part of 2018 has been challenging for equity markets due to both global and domestic factors.
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"Globally, crude oil price saw almost 20 per cent increase between August-October of this year. Further, bond yield curves have risen during the same period.
"On domestic front, we have seen increase in petrol and diesel prices to all-time high rates and interest rates have also moved up. Also, the impact of IL&FS default and tightening of liquidity for NBFCs had a negative sentiment on the equity markets," he said.
Naik said the state elections in December also kept many investors away, with several factors leading to subdued interest for equities during the year.
Of the total Rs 5.1 trillion mopped up through placement of debt securities, Rs 4.8 trillion came from private placement and over Rs 29.6 billion through public issuance.
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Within the equity segment, main-board IPOs helped garner Rs 309.59 billion and SME IPOs brought in Rs 22.54 billion.
Besides, rights issue of shares to existing shareholders helped raise Rs 185. 72 billion), QIP or Qualified Institutional Placement accounted for Rs 160. 77 billion) and Offer for Sale through stock exchange mechanism got Rs 106.78 billion.
Despite getting regulator Sebi's go-ahead to float initial share-sales worth over Rs 600 billion in 2018, the year saw a total of 24 IPOs raising only Rs 309.59 billion. This was much lower than 36 firms collecting a record amount of over Rs 680 billion through initial share-sales in 2017.
The capital markets regulator has also voiced concern over the slow pace of primary issues, despite a good market condition. Sebi Chairman Ajay Tyagi has asked investment bankers to do more "diligence" on pricing front to get investors in.
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"The IPOs are not taking place is something that's a cause of worry," Tyagi said, while observing that companies have found alternatives like preferential issues to raise money.
Companies that came out of IPOs in 2018 included Bandhan Bank (Rs 44.73 billion), Hindustan Aeronautics (Rs 42.29 billion), ICICI Securities (Rs 35.15 billion), HDFC AMC (Rs 28 billion), Varroc Engineering (Rs 19.55 billion), IndoStar Capital Finance (Rs 18.44 billion) and Lemon Tree Hotels (Rs 10.40 billion).
However, the small and medium enterprise (SME) platform witnessed hectic activities in the IPO space, raising Rs 22.54 billion in 2018 -- much higher than Rs 16.79 billion collected last year.
Marketmen believe outlook appears challenging for initial part of the new year on the IPO front due to the general elections, expected to take place in first half of the year.
"Fund raising through IPOs will be slightly lower in 2019 as compared to 2018 because of several factors including general elections, poor market sentiments and depreciating currency," said Ashok Lalwani, Global Chair of India Practice at Baker McKenzie.
Reliance Securities CEO B Gopkumar said, "The initial part of 2019 is likely to be challenging till Lok Sabha election results are out. After that if a stable government were to be formed then market volatility will reduce and IPO market will pick up significantly. Thus, we see an encouraging second half next year compared to tepid first half."
Motilal Oswal Investment Banking Executive Director Mukund Ranganathan said investors are looking for cues globally too before committing significant new capital for equities.
While fund collection through rights issues has gone up, the same through QIP and OFS routes came down.
"QIPs of last year have failed to deliver significant returns that's why we have sen lower fund raising through the route in 2018," Gopkumar said.
Experts, however, are hopeful the fund-raising will gather steam in second half of 2019 with a pick-up in the overall investment climate.
The data shows the debt market remains the most preferred route for raising funds to support business needs of the corporate world.
Out of the cumulative Rs 5.9 trillion garnered so far this year from capital markets, a large chunk or Rs 5.1 trillion has been mopped up from the debt market and the remaining amount of about Rs 78,500 came from equity markets, figures compiled by data analytics major Prime Database showed.
In 2017, firms had raised Rs 8.6 trillion, including nearly Rs 7 trillion through debt markets and Rs 1.6 trillion from equities.
In equity market, funds mostly came from initial public offers (IPOs) and issuance of shares to institutional investors.
ALSO READ: India Inc promoters lose Rs 1.7 trillion, but a rich year for tycoons still
The final figures may go up to end the year at around Rs 6 trillion for debt and equities, experts said.
The funds have been raised mainly for business expansion plans, loan repayments and to support working capital, while a large amount raised from IPOs also went to the promoters, private equity firms and other existing shareholders for part or full sale of their investments.
"Lack of corporate lending appetite by PSU banks combined with attractive yields in the corporate bond markets over bank rates appear to motivate corporates to shift towards market based borrowing through non-convertible debentures (NCD) issuances for raising funds," WGC Wealth Chief Investment Officer Rajesh Cheruvu said.
Rajendra Naik, MD (Investment Banking) at Centrum Capital said the later part of 2018 has been challenging for equity markets due to both global and domestic factors.
ALSO READ: India Inc takes tiny steps in the journey to become diverse and inclusive
"Globally, crude oil price saw almost 20 per cent increase between August-October of this year. Further, bond yield curves have risen during the same period.
"On domestic front, we have seen increase in petrol and diesel prices to all-time high rates and interest rates have also moved up. Also, the impact of IL&FS default and tightening of liquidity for NBFCs had a negative sentiment on the equity markets," he said.
Naik said the state elections in December also kept many investors away, with several factors leading to subdued interest for equities during the year.
Of the total Rs 5.1 trillion mopped up through placement of debt securities, Rs 4.8 trillion came from private placement and over Rs 29.6 billion through public issuance.
ALSO READ: Globalising India Inc
Within the equity segment, main-board IPOs helped garner Rs 309.59 billion and SME IPOs brought in Rs 22.54 billion.
Besides, rights issue of shares to existing shareholders helped raise Rs 185. 72 billion), QIP or Qualified Institutional Placement accounted for Rs 160. 77 billion) and Offer for Sale through stock exchange mechanism got Rs 106.78 billion.
Despite getting regulator Sebi's go-ahead to float initial share-sales worth over Rs 600 billion in 2018, the year saw a total of 24 IPOs raising only Rs 309.59 billion. This was much lower than 36 firms collecting a record amount of over Rs 680 billion through initial share-sales in 2017.
The capital markets regulator has also voiced concern over the slow pace of primary issues, despite a good market condition. Sebi Chairman Ajay Tyagi has asked investment bankers to do more "diligence" on pricing front to get investors in.
ALSO READ: Rattled nerves at India Inc lead to boom in overnight funds to Rs 123 bn
"The IPOs are not taking place is something that's a cause of worry," Tyagi said, while observing that companies have found alternatives like preferential issues to raise money.
Companies that came out of IPOs in 2018 included Bandhan Bank (Rs 44.73 billion), Hindustan Aeronautics (Rs 42.29 billion), ICICI Securities (Rs 35.15 billion), HDFC AMC (Rs 28 billion), Varroc Engineering (Rs 19.55 billion), IndoStar Capital Finance (Rs 18.44 billion) and Lemon Tree Hotels (Rs 10.40 billion).
However, the small and medium enterprise (SME) platform witnessed hectic activities in the IPO space, raising Rs 22.54 billion in 2018 -- much higher than Rs 16.79 billion collected last year.
Marketmen believe outlook appears challenging for initial part of the new year on the IPO front due to the general elections, expected to take place in first half of the year.
"Fund raising through IPOs will be slightly lower in 2019 as compared to 2018 because of several factors including general elections, poor market sentiments and depreciating currency," said Ashok Lalwani, Global Chair of India Practice at Baker McKenzie.
Reliance Securities CEO B Gopkumar said, "The initial part of 2019 is likely to be challenging till Lok Sabha election results are out. After that if a stable government were to be formed then market volatility will reduce and IPO market will pick up significantly. Thus, we see an encouraging second half next year compared to tepid first half."
Motilal Oswal Investment Banking Executive Director Mukund Ranganathan said investors are looking for cues globally too before committing significant new capital for equities.
While fund collection through rights issues has gone up, the same through QIP and OFS routes came down.
"QIPs of last year have failed to deliver significant returns that's why we have sen lower fund raising through the route in 2018," Gopkumar said.
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