India Inc. on Fundraising Spree; Raises US$9 Billion

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Oct. 21 – India’s corporate sector has been able to raise US$9 billion through the sale of shares and convertible bonds to institutional buyers since April, and is expected to raise another US$15 billion in the next six months, reports The Economics Times.

India Inc. is a common term used by the Indian media to refer to the corporate sector of the country.

The fundraising spree signal that Indian companies have finally broken through the liquidity crisis and are gearing up to finance growth plans. Most of these companies issued equity shares to a select group of investors by way of Qualified Institutional Placement (QIP), which involves selling ordinary rupee denominated equity shares to institutional investors, or the likes of mutual funds, pension funds and insurance companies.

Others choose foreign currency convertible bonds or FCCBs and American and global depository receipts (ADR/GDR), which represent underlying Indian shares.

The companies which raised money through QIP include United Spirits, L&T, 3i Infotech and Parsvnath Developers. “All the pent up demand for capital has come to the fore and corporate India wants to raise money at the earliest,” JP Morgan executive director and head of capital markets Vinay Menon told The Economic Times. “Other capital raising options are time consuming and also carry costs, hence QIP is quite popular.”

A steady equity market also plays a key role in facilitating QIP. In the past month, Sensex grew 3.6 percent, United Spirits surged 15 percent and HCL rose 4.5 percent, indicating an economic recovery has prompted investors to buy more shares.