India Inc raises more than Rs 9-Lakh Crore through shares and debt issues in 2021
Indian companies recovered over Rs 9 lakh crore through equity and borrowing in 2021 to meet their renewed thirst for business expansion in a vibrant stock market teeming with cash and helped by restoring macroeconomic indicators after the downturns. first months ravaged by the pandemic. Unless the ever-evolving Omicron situation plays a spoiler, next year should be a lot more robust in terms of fundraising activities and there doesn’t appear to be a shortage of funds, the experts said.
“Banks have been sitting on excess liquidity for some time and there should be enough appetite for quality borrowers,” said Ricky Kirpalani, Principal Sponsor, First Water Capital Fund. Over the past year, fundraising through debt markets has fallen sharply, while equity fundraising has been robust and the bullish run of stock markets with liquidity all around has resulted in a lift. record funds through Initial Public Offerings (IPOs).
Despite the decline in debt fundraising, it continued to contribute a lion’s share of overall fundraising activity in 2021. Debt fundraising slowed due to the disruptions economic impact during the first wave of the coronavirus pandemic, followed by a prolonged impact of the devastating second wave, said Sandeep Bhardwaj, CEO, Retail, IIFL Securities.
On the cumulative crore of Rs 9.01 lakh raised up to mid-December of this year, funds totaling Rs 5.53 lakh crore were recovered from the debt market, Rs 2.1 lakh crore came from the debt market. shares, Rs 30,840 crore via REITs and InvITs, and Rs 1.06 lakh crore via the overseas route, showed data compiled by leading analytics database Prime. In 2020, companies raised Rs 11 lakh crore, of which Rs 7.91 lakh crore through debt and Rs 2.12 lakh crore through equity.
Explaining an increase in fundraising through debt in 2020, Samir Sheth, partner and head of business advisory services, BDO India, said the companies halted because a strict lockdown has been imposed since March. 2020, and to manage the negative impact of the same, companies have resorted to debt. He added that the stock market was down for most of the year and the PE / VC markets were also not very active, leaving companies with few options other than debt financing in 2020.
New capital has been raised by companies for debt repayment, to fund capital spending on new projects, to support inorganic growth like acquisitions, as well as for marketing and R&D purposes, Satyen said. Shah, Managing Director and Head of Investment Banking at Edelweiss Financial. While businesses wanted the cash to overcome uncertainties surrounding the pandemic in 2020, much of this has been linked to economic growth in 2021 and businesses are raising funds primarily to grow, Sheth said.
Of the total of Rs 5.53 lakh crore raised on Indian debt markets in 2021, Rs 5.38 lakh crore came from the private placement and Rs 14,277 crore came from a public issue. “India’s debt markets are mainly exploited by companies in the financial sector which use funds for subsequent loans (as the business cycle accelerates) and strengthen capital cushions,” said Ajay Manglunia, Managing Director and Head of Institutional Fixed Income, JM Financial.
The non-financial group deploys the funds primarily for general business expenses, capital spending and capital for inorganic growth opportunities, in addition to refinancing existing debt, he added. In the equity market, funds came mainly from initial stock sales, as abundant global liquidity, a robust equity market and massive equity participation pushed the IPO market to new levels this year.
In the equity segment, IPO channel helped companies raise Rs 1.2 lakh crore, Qualified Institutional Placement (QIP) channel added Rs 41,894 crore, issuance of stock rights to existing shareholders accounted for 27 Rs 771 crore, while the offer to sell (OFS) through stock exchange mechanism contributed Rs 22,912 crore. A total of 63 IPOs broke a record Rs 1.2 lakh crore, and small and medium-sized business (SME) IPOs brought in Rs 710 crore.
In comparison, Rs 26,613 crore was raked in through 14 IPOs on the motherboard, while Rs 159 crore came through the SME segment in 2020. Vibrant stock markets and dramatic listing gains by some companies were the main ones. factors behind the IPO frenzy, said Piyush Nagda. Investment Product Manager at Prabhudas Lilladher.
Bhardwaj of IIFL Securities believes that the uptrend will continue in 2022 for the IPO market as well and that the new year could see a new record level of funds raised as the initial mega-sale of LIC shares is also underway. Classes. Besides public issues, fundraising through PAQs fell to Rs 41,894 crore in 2021 from Rs 84,509 crore last year, mainly due to the availability of cheaper debt and the expectation of high valuations due to rising markets, making promoters hesitant to dilute.
Another reason for the decline in QIP fundraising could be expectations of a further rise in the stock markets, with markets steadily rising from the start of the year to mid-November. The number of PAQs in 2021 was higher than last year, but the quantum was relatively lower.
Going forward, Kriplani, of First Water Capital Fund, said fundraising through QIPs may accelerate as the investment spending cycle now picks up and valuations are rich. Funds raised through the rights issue mode also plunged to Rs 27,771 crore in 2021 from Rs 64,984 crore last year. Bharati Airtel contributed a significant share with its rights issue of Rs 21,000 crore this year.
The year 2020 saw Reliance’s largest rights issue to the tune of Rs 53,000 crore, which makes this year pale in comparison. However, funds collected through the OFS channel – used for dilution of promoters’ assets – reached Rs 22,912 crore this year, compared to Rs 20,901 crore in 2020.
In addition, companies have adopted the infrastructure investment trusts (InvIT) and real estate investment trusts (REITs) mode to raise funds and have raked in Rs 32,125 crore over the past year, or less than Rs 38,109 crore mobilized in 2020. In addition to the national road, funds totaling Rs 1.06 lakh crore were raised through the foreign bond markets and convertible bonds into foreign currency (FCCB), well below nearly Rs 68,000 crore collected last year.
Going forward, experts believe that a robust financing scenario for Indian companies will continue until 2022 for equity and debt pathways. “Considering the high liquidity, the situation of Covid under control, the outlook for positive corporate earnings and the overall growth of India. We expect investors to continue looking to fund Indian companies, ”said Shah of Edelweiss Financial Services.
According to BDO India’s Sheth, barring a significant economic impact from Omicron, overall economic growth and a significant funding scenario for Indian businesses will continue through 2022. The next few quarters as the economy returns back on track and that private investment plans accelerate.