Mumbai: With a stable, seemingly pro-business govt at the Centre, a resurgent corporate India is on a fund-raising spree, aiming to increase up to Rs 120,000 cr in the next 2 years, of which about Rs 71,000 cr will be increased in the next 6 months, say investment bankers, who are seeing a boom of sorts after 5 years of decline.
Companies are increasing finances through dollar bonds & euro bonds, apart from launching provides for sale (OFS), qualified institutional placements (QIPs) & selling share to investors in India & overseas. “This is one of the largest fund-raising exercises, making companies like ours to hire more,” says Motilal Oswal, chairman of Motilal Oswal Financial Services. “This (the new govt) has given the confidence to Indian companies to go ahead & increase funds for projects in India.”
Foreign investors are waiting to participate in the action, & Indian companies are making the most of it. For instance, auto parts maker Motherson Sumi is marketing its Rs 3,000-cr Euro bonds to investors, although Vedanta is seeing a good response to its Rs 3,000-cr dollar bond problem.
Not only debt, equity is also in need from investors. On Tuesday, L&T IDPL sold share to Canadian Pension Plan Fund for Rs 1,000 cr. The fund has agreed to purchase additional share for Rs 1,000 cr later. On Tuesday, the Anil Ambani-led Reliance Communications increased Rs 3,000 crore by selling new stocks to qualified institutional investors.
The Centre is making the most of the Bull Run to sell share in Hindustan Zinc, following the Securities & Exchange Board of India allowing non-promoter shareholders to offer stocks through the OFS route. The sale of govt share will fetch about Rs 20,000 cr. An OFS for Steel Authority of India Ltd is predicted to follow.
Experts say as of now, 21 public sector undertakings, amid the BSE 500 companies; have free-float of less than 25 %. At current market costs, the market capitalization of the share to be sold to meet norms will be $9.6 billion, through 3 years. Of this, Coal India will account for 63 %, or Rs 36,000 cr.
“I expect in the next 2 years, Indian capital markets will see equity fund increasing of $15-20 billion,” says Bharat Banka, managing director & chief executive of Aditya Birla Private Equity. “Additionally, the strategic interest of global players will increase considerably & allow private equity investors to get strategic or control premia for their investments,” he said.
Deal Street buzzing
Bankers say the deal front is buzzing with activity, with companies planning to either go for acquisitions or sell stake. The Birlas are in talks with Jaypee to buy out Jaypee’s cement plant in Rewa in central India, at a valuation of $1.2 billion. Though the Birlas declined to comment, insiders say the group is conducting due diligence on a few Holcim-Lafarge plants in India, which the latter wants to sell after their merger in Europe the Tatas are also increasing Rs 7,200 cr to purchase back 26.5 % share in Tata Teleservices from Japan’s NTT DoCoMo by this month-end.
Public sector companies have also caught the M&A. A team of International Coal Ventures Ltd, a venture owned by SAIL, Coal India, NMDC & NTPC, is in Mozambique to purchase a coking coal mine from Rio Tinto for about $250 million (Rs 1,500 cr).
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