Capital gains: India Inc on a fundraising spree

Mumbai: India Inc may be heading for one of its best ever fundraising years in FY21 as companies rush to take advantage of low rates and shore up their capital after the devastating impact of Covid-19 related disruptions. Filings so far in April and May show that companies have announced plans to raise ₹1.5 lakh crore in debt and equity which include Reliance Industries’ ₹53,000 crore rights issue. “Like humans are seeking a vaccine, many companies will need a dose of Covid capital to survive,” said Ravi Sardana, EVP, ICICI Securities. “Businesses have lost value and will need funds to recapitalise. Besides loss of sales, companies are facing delays in customer recoveries, higher cost of operations and supply chain disruptions.”India Inc’s best years for fundraising were in FY18 when ₹8.37 lakh crore was raised in equity and debt. In FY20, ₹7.91 lakh crore was raised. Since April this year, listed companies such as RIL, Ashok Leyland, Cipla, Wockhardt, TVS Motors, Apollo Tyres, L&T, Godrej Properties, as well as several banks and NBFCs have announced plans to raise funds. 75838030Targeted Long-Term Repo OpThese will be done through various instruments like rights issue, preferential allotment, qualified institutional placement, and private placement of bonds or debentures. Gross bond sales are expected to be ₹6.4-7.4 lakh crore with redemptions estimated at about ₹5 lakh crore. “Lower interest rate would be one of the reasons that will trigger more market borrowings,” said B Prasanna, group head - global markets, ICICI Bank. Spreads are high, and appetite is for selective names. Given the current uncertainty and in light of weak business outlook, credit growth is expected to be more in the nature of working capital.“Large corporates with AAA rated firms are rushing to issue bonds mainly to banks for general corporate purposes, including funding for working capital, capital expenditures and repayment of debt,” said Lakshmi Iyer, CIO, debt, Kotak Mahindra Asset Management Co. “Some companies that needed to add liquidity to their balance sheet to endure the Covid-19 economic lockdown are taking advantage of the lower interest rate environment in issuing debt,” she added. India’s most valuable company Reliance Industries is raising ₹53,000 crore through rights issues mainly to repay debt. It has already announced plans to raise ₹25,000 crore through bonds, of which ₹10,000 crore was raised last week. Some companies are borrowing money from the debt markets by issuing multiple debt instruments to banks, which can borrow at 4.4% from the RBI to buy bonds issued by Indian corporates, under the Targeted Long-Term Repo Operation (TLTRO).Kotak Mahindra Bank last month said it will raise equity capital up to ₹7,500 crore through a QIP. Tata Steel and HDFC Life are planning to raise ₹7,000 crore and ₹600 crore, respectively, via bonds.(With inputs from Nehal Chailawala and Saikat Das in Mumbai)

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