Posts Tagged ‘Indian companies’

ECBs and FCCBs Dropped 6% in Dec 2009 !

external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) have dropped 6% in December 2009

.

Total approvals received by Indian companies to raise capital by way of external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) have dropped 6% in December 2009 to $1.56 billion as against $1.66 billion in December 2008.

.

This is as per the data released by the Reserve Bank of India (RBI).

.

Total approvals received by Indian companies to raise capital by ECBs and FCCBs stood at $2.35 billion in November 2009.

There were about 68 deals in December 2009, out of which three deals were by way of FCCBs.

.

Daimler India Commercial Vehicles Pvt Ltd raised $402 million by way of ECBs for new projects for a maturity period of eight years and 11 months.

.

“The ECB market is definitely looking bullish for 2010, however the robustness will not be the way it was in 2007.

Indian banks are also not lending to the corporates here.

Hence, there will be appetite for foreign funds. However, there is a challenge on the forex fluctuation risk as well,” noted Jagannadham Thunuguntla, equity head with SMC Capital.

.

According to market analysts, more Indian companies are going to take the ECB route to raise funds, with the interest rates heading northwards in India.

Currently there is also more demand for short-term funds.

.

🙂

.

Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

.

Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

.

Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

.

In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

.

Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

.

2009 was the year of the QIPs.

QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs.

.

QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

.

Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

.

Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

.

QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

.

In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

.

According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

.

Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

.

Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

.

“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

.

QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

.

🙂

.

QIPs account for 60% of funds raised by India Inc

Qualified Institutional Placements (QIP) contrib-uted Rs 6 out of every Rs 10 raised by Indian companies from domestic sources in January-November 2009. Simply put, Indian companies raised Rs 47,419 crore from domestic sources in the 11 months of this year with QIP funds accounting for Rs 28,726 crore (about 60 per cent).


In the same 11 months of 2008, India Inc raised Rs 2,104 by means of QIPs out of the total Rs 48,807 crore garnered from domestic so-urces, shows a study by New Delhi-based SMC Capitals. This means that in 2009 QIPs account for more than half of total funds raised. Just to put the things in perspective, QIPs am-ounted for only 4.3 per cent of the funds raised during January to November 2008. This underlines the kind of domination QIPs have sho-wn in 2009; and QIPs have truly come to the rescue of cash-starved Indian corporates, said Jagannadham Thun-uguntla, Equity Head at SMC Capitals.

The funds raised thro-ugh IPOs as a percentage of total funds raised through domestic sources is to the tune of 31.7 per cent during January-November, at Rs 15,043 crore compared to that in January-November 2008, which was 34.8 per cent at Rs 16,995 crore, supported heavily by the Reliance Po-wer mega IPO of 2008. The funds mopped up from ADRs/GDRs have jumped up by more than 29 times from $0.1 billion in January to November 2008 to $ 3.15 billion in January to November 2009.

India’s Wealth Lies in Its Cities

It was once believed that India lives in its villages.

.

Now it is clear that India’s wealth lies in its cities, or more specifically, Mumbai.

 

India's Wealth Lies in Its Cities

A study conducted by Delhi-based SMC Global classified companies geographically on the location of their registered offices.

.

It reveals that Mumbai-registered companies account for 36.28% of the total BSE 500 market cap.

.

Some of the prominent names based out of Mumbai are Reliance Industries, L&T, HDFC and SBI.

.

Also, out of the market capitalisation ascribed to Maharashtra which has the highest market capitalization among the states — more than 90% originates from Mumbai.

🙂

In fact, Mumbai and six other cities account for 85.71% of the total market capitalisation of BSE 500.

.

With Delhi NCR (National Capital Region, which includes satellite cities such as Gurgaon and Noida along with the capital) contributing 27.82%.

.

After the financial and political capitals, state capitals take the fore.

.

Bangalore lays claim to 7.10%,

Hyderabad to 4.86% and Kolkata accounts for 3.83%,

while Ahmedabad and Chennai account for 3.35% and 2.47%, respectively.

.

On a state-wide basis, five states in combination with Delhi NCR and Maharashtra account for 94.20% of the total market cap.

A total of 66.17% of the index’s market cap can be traced to Maharashtra and Delhi NCR.

While the latter accounts for 38.35%, Delhi accounts 27.82%.

.

Karnataka accounts for 7.74%, Gujarat, 7.48%, Andhra Pradesh is at 4.95% and Tamil Nadu at 4.02%, while Bengal has 3.83%.

.

Though the big Indian companies have a pan-India presence with factories or plants located across the country, they tend to have registered offices in metros.

.

That is because of the ease of operations and presence of other corporate houses, suggested the study.

.

“The traditional metro cities have accumulation advantage.

Its ultimately the money which brings in more money.

As the Indian economy keeps evolving, tier-2 and tier-3 cities may catchup gradually, to bring-in more equitable distribution of wealth across the country.”

.

…said Jagannadham Thunuguntla, equity head at SMC Capitals.

🙂

SEBI Allows Auctions for QIBs in FPOs :)

SEBI Allows Auctions for QIBs in FPOs

Market regulator, SEBI has introduced a significant change in the way institutional bidders invest in follow-on public offers by allowing allotments through auctions.

 

The Securities and Exchange Board of India (Sebi) has amended the Issue of Capital and Disclosure Requirements Regulations (ICDR) to allow pure auctions for qualified institutional investors (QIBs) in follow-on public offerings to begin with.


The method may be later extended to initial public offerings.

🙂

Under the new method, bidders will be free to bid at any price above the floor price.

At present, allotments are made at the floor price.

Retail investors, however , will be allotted shares at the floor price.

🙂


The board also decided that the issuer is free to place a cap either in terms of the number of shares or percentage to issued capital of the company so that a single bidder does not garner all the shares on offer, ensuring a wider distribution of shareholding.

🙂


Jagannadham Thunuguntla, Equity Head,  SMC Capitals, said this means an institutional investor can continue to bid above the floor price and the QIB allotment will be made to the highest bidder.


“The intent is to enable companies to mop up more funds. Earlier, even when there were huge subscriptions and huge demand for an issue, the company could not get more money. This becomes more relevant in the context of the recently announced divestment plans and FPOs by the government for public sector units,” he said.

🙂


Auction for QIBs is welcome as it would allow risk-taking entities and not just the promoters to be a part of the price discovery process, other analyst said.


A SEBI release issued after the board meeting also said the minimum market capitalisation required by listed firms to sell shares in follow-on offerings has been halved to Rs.5,000 crores  from Rs 10,000 crore.

🙂


Moreover, the market regulator has also made it a mandatory that all listed companies would have to furnish audited or un-audited balance sheets on a half-yearly basis within 45 days from the end of the quarter instead of the current yearly basis.

🙂

This would imply that Indian companies will be required to disclose balance sheet items.


Shareholders would be able to access the statement of assets and liabilities of the company and its solvency position on a half-yearly basis.


Shareholders would receive immense help in making informed investment decisions now and would be in better position to assess the financial health of the companies, with the implementation of this SEBI regulation of mandating frequent disclosure of the asset-liability position of companies by companies.

🙂

Record Fund Raising by India Inc,through QIPs, is on the Cards.

 

Record Fund Raising by India Inc,through QIPs, is on the Cards

Record Fund Raising by India Inc,through QIPs, is on the Cards

 

 

Indian companies are all set to  raise record fund through share sales to institutional investors in the next few months as they attempt to reduce debt accumulated during their takeovers.

Hindalco, Aban Offshore and Tech Mahindra, which bought the scandal-hit Satyam Computer, will lead this record fund raising by India Inc.

Indian companies have approvals from shareholders to raise as much as Rs 68,000 crore by selling shares to institutional investors under the so-called qualified institutional placement route.

This is in addition to around Rs 26,000 cr that has been raised by companies such as real estate developer Unitech and Suzlon Energy in the last six months, thanks to the signs of economic revival and  record stocks rally.

India Inc raised as much as Rs 26,430 cr in the last thirty-six QIP issues since March this year, according to the analysis.

These companies which raised funds in the last six months still have room to raise another Rs 23,000 cr based on the approvals shareholders have given them.

There are several companies which have received approval for QIPs between June and October with a potential to raise as much as Rs 44,000 crore, but are yet to hit the market.

Hindalco, which is saddled with debt after it acquired Canada’s Novellis, plans to raise Rs 2,900 crore and Tech Mahindra plans to raise to partly repay the loan it took to buy Satyam Computer.

Essar Oil which is negotiating to buy Shell’s refineries in the UK plans to raise around Rs 9,000 cr, whereas JSW Steel has a mandate raise Rs 4,853 cr.

Shareholders’ approval is valid for a year and most of these companies took approval after June this year.

“The issues that have come till now got strong interest from institutional investors, and predominantly from foreign buyers who bought over 90% of the QIP issues.  Given the current market conditions and the kind of interest that Investors displayed in the Indian growth story, the proposed issues should be subscribed successfully,” said Jagannadham Thunuguntla, equity head, SMC Capitals.

The fund raising gets bigger when one takes into account the potential IPOs and government share sales which may run into billions of dollars more.

🙂