NEW DELHI: Indian companies have mopped up more than Rs 9 lakh crore through equity and debt routes in 2021 to meet their renewed thirst for business expansion in a buoyant stock market brimming with liquidity and helped by recovering macroeconomic indicators after pandemic-ravaged first few months.
Unless the still-evolving Omicron situation plays spoilsport, the next year is expected to be much more robust in terms of fund-raising activities and there seems to be no dearth of funds, experts said.
“The banks have been sitting on surplus liquidity for quite a while and there should be enough appetite for quality borrowers, said Ricky Kirpalani, Lead Sponsor, First Water Capital Fund.
In the year passing by, fund mobilisation through debt markets has fallen sharply, while the equity fund raising has been robust and the stock market bull-run with liquidity all-around has resulted in record fund-raising through initial public offerings (IPOs).
Despite the plunge in fund mobilisation through the debt route, it continued to contribute a lion’s share to the overall fund-raising activity in 2021.
Debt fund-raising has slowed because of long-term economic disruptions during the first wave of the coronavirus pandemic, followed by a prolonged impact of the ravaging second wave, said Sandeep Bhardwaj, CEO, Retail, IIFL Securities.
Out of the cumulative Rs 9.01 lakh crore garnered till mid-December this year, funds totalling Rs 5.53 lakh crore were mopped up from the debt market, Rs 2.1 lakh crore came from the equity market, Rs 30,840 crore through REITs and InvITs and Rs 1.06 lakh crore via the overseas route, data compiled by analytics major Prime Database showed.
In 2020, firms raised Rs 11 lakh crore, including Rs 7.91 lakh crore through debt and Rs 2.12 lakh crore through equity.
Explaining higher fund-raising through debt route in 2020, Samir Sheth, Partner and Head – Deal Advisory Services, BDO India, said that businesses came to a halt as a strict lockdown was imposed since March 2020 and to manage the adverse impact of the same, corporates resorted to debts.
He further said that the stock market was down for the most part of the year and PE/VC markets were also not that active, leaving businesses with few options other than a debt funding in 2020.
Fresh capital was raised by companies for debt payment, to fund capital expenditure for new projects, to support inorganic growth like acquisitions as also for marketing and R&D purposes, said Satyen Shah, MD & Head, Investment Banking at Edelweiss Financial.
While companies wanted to have the liquidity to tide over uncertainties related to the pandemic during 2020, it has been largely related to economic growth in 2021 and businesses are raising funds primarily to expand, Sheth said.
Of the total Rs 5.53 lakh crore raised through Indian debt markets in 2021, Rs 5.38 lakh crore came from the private placement and Rs 14,277 crore was through public issuance.
“Indian debt markets are mostly tapped by the financial sector companies who use funds for onward lending (as the economic cycle gathers pace) and boost capital buffers,” said Ajay Manglunia, Managing Director & Head – Institutional Fixed Income, JM Financial.
The non-financial bunch deploys the funds majorly for general corporate expenses, capital expenditure and capital for inorganic growth opportunities apart from refinancing existing debt, he added.
In the equity market, funds mostly came from initial share sales as ample global liquidity, robust equity market and massive equity participation pushed the IPO market to new levels this year.
Within the equity segment, the IPO route helped companies raise Rs 1.2 lakh crore, Qualified Institutional Placement (QIP) route added Rs 41,894 crore, rights issue of shares to existing shareholders accounted for Rs 27,771 crore, while Offer for Sale (OFS) through stock exchange mechanism contributed Rs 22,912 crore.
A total of 63 IPOs mopped-up record Rs 1.2 lakh crore, and Small and Medium Enterprise (SME) IPOs brought in Rs 710 crore.
In comparison, Rs 26,613 crore were raked in through 14 main-board IPOs, while Rs 159 crore came via the SME segment in 2020.
Buoyant stock markets and spectacular listing gains by some companies were the main factors driving the IPO frenzy, said Piyush Nagda Head-Investment Product at Prabhudas Lilladher.
IIFL Securities’ Bhardwaj believes that bullish trajectory will continue in 2022 also for the IPO market and the new year might see a new record level of funds raised while the mega initial share-sale of LIC is also in the pipeline.
Apart from public issues, equity fund-raising through QIPs dropped to Rs 41,894 crore in 2021 from Rs 84,509 crore last year, primarily on account of availability of cheaper debt and expectation of high valuations due to rising markets making promoters hesitant to dilute.
Another reason for the decline in QIPs fund-raising could be expectations of a further rise in stock markets as the markets were constantly rising from the beginning of the year till mid-November. —PTI