Companies have raised Rs 3.3 lakh crore (Rs 3.3 trillion) since FY09; the total since liberalisation has been Rs 6.19 lakh crore ( Rs 6.19 trillion)
The global financial crisis did not stifle India’s equity markets, going by the amounts raised in subsequent years. Indian companies raised a total of Rs 3.3 lakh crore (Rs 3.3 trillion) through equity issuances from 2008-09 onwards.
This is 53 per cent of the Rs 6.19 lakh crore (Rs 6.19 trillion) raised since the financial year ending March 1991, according to an analysis of statistics from PRIME Database.
The analysis looked at funds raised through Initial Public Offers (IPOs), Follow-on Public Offers, Offer For Sale (OFS), rights issues, Qualified Institutional Placements (QIPs) and Institutional Placement Programmes.
The bulk of the fund raising came through the QIP route, by which companies can quickly tap institutional entities to take advantage of short periods of buoyancy in a volatile market. It accounted for Rs 1.05 lakh crore (Rs 1.05 trillion), which includes Rs 39,768 crore (Rs 397.68 billion) immediately after the crisis in the financial year ending March 2010.
Indian equity markets had bottomed out in March 2009, when the Sensex touched a low of around 8,000.
Interestingly, the equity glut coincided with a directive from the Securities and Exchange Board of India (Sebi) which required companies to have a minimum public shareholding of 25 per cent.
Government companies were allowed to stay at 10 per cent; this was changed recently to 25 per cent.
“Sebi’s move certainly has contributed in high amounts being raised through OFS, as it required promoters to shed their stake. This has increased the total amount of equity fund raising significantly,” said Pranav Haldea, managing director of PRIME Database.
Ajay Saraf, executive director, ICICI Securities, said there was always a demand for good companies.
And, the government also played a significant role in recent years. “There was demand for quality issuances… The government disinvestment after 2008 has contributed a fair amount to the equity share sales figures,” he said.
Government divestment reached record figures after the financial crisis, at the same time as promoters were required to bring down their stake in companies to 75 per cent or less.
This coincided with large amounts of global liquidity programmes, from America, Europe and Japan, to prop their economies after the financial crisis.
“Globally, governments pumped in a lot of surplus liquidity, which also found its way into India,” said one foreign banker.
The IPO market saw a pick-up in FY10 and FY11, though short of the FY08 high of Rs 41,323 crore (Rs 413.23 billion).
There was a later decline, which took total IPO fund raising to the lowest figure since the turn of the millennium. There was only one main-board IPO in FY13, which raised Rs 919 crore.
“The market for IPOs requires some stability before it can take off in a big way. Companies need to decide, file, get feedback from the regulator and then have a year before they can hit the market. A lot of other issuances (such as QIPs) can happen in around 30 days,” said Saraf.
The IPO market is expected to pick up in the days ahead. “Even after revival in the secondary market last year, a lot of companies had been waiting for political certainty before deciding on their IPOs. We expect a lot more companies to file their documents for IPOs in the second half of the year,” said Haldea.
“With a stable government in place, we can expect the next few years to be good for equity fund raising,” said Girish Nadkarni, managing director at Motilal Oswal Investment Banking.