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Fund raising plans of India Inc
Jun 25, 2014

As positive sentiments rule Indian stock markets, corporate fund raising activity is gaining momentum. The current scenario is starkly in contrast with situation some time back when capital markets were almost closed to these companies. However, with Modi Government at the centre, tide has turned in favour of India Inc. And the latter seems set to make the most of it. As an article in Business Standard suggests, the amount of money estimated to be raised over next two years stands at Rs 1,200 bn. In fact, around 59% of this amount is likely to be raised by end of this calendar year. Further, as the chart suggests, the top five firms will be raising 50% of the estimated amount, led by Hindustan Zinc Ltd and Tata Steel Ltd. India Inc is approaching investors both at home and abroad through foreign currency bonds, offer for sale and qualified institutional placements (QIPs). Even the Government that has been struggling with disinvestment targets for PSUs has big plans to sell stakes and raise money. Further, merger and acquisition space is likely to see a lot of action.

However, investors must be cautious and not get carried away by the market frenzy. One should not forget that in the past, a number of companies that had raised debt were caught on the wrong foot when economy did not grow as expected. Even now, Indian economy is yet to come out of the woods. It may take some time before reforms get implemented or they show impact on the respective sectors and economy. Hence investors would do well not to ignore the fundamentals in this sentiments based rally.

Data Source: Business Standard & Bloomberg
HZL= Hindustan Zinc; IOC = Indian Oil Corporation; MS = Motherson Sumi

This Chart Of The Day was published in The 5 Minute WrapUp - A 30 day report card of the Modi government

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