The ice freezing waves of recession had frozen the prospects of Indian industrial growth after September 2008.Indian industries have to cut short production, rescheduling the production, stopped investments in new projects and finally followed the gate of retrenchments. No vacancy was the song being played on the streets of Indian corporate houses.
Sensex was dragged down in such a manner that every one took for granted that the sensex and nifty will be zero within a very short span of time. On 31st December 2009 just year after we are standing at a growth rate of the economy around 7%+ followed with a sensex recovery about 80% from the Black days.
Indian corporate took a turn around from cash strapped position to cash rich levels.2009 was the year of proof in the history of the Indian economy that recession did not freeze us like an iceberg in Antarctica.
Indian corporate was the biggest sufferers when the big banks of west plunged and all the funds which were supposed to get invested in Indian companies disappeared just like water evaporation.
The dramatic turn around of the cash less position to cash rich position happened due to funds raised from various sources:
• Rs 34,100 crore were raised by the 51 QIPs made during the year
• Nearly Rs 50,000 crore was raised by Indian companies via domestic sources.
• Yes the figure is strong enough and that’s too based upon domestic support.
• Out of this 60% of that amount was raised via single instrument, the qualified institutional placement (QIP).
• When we go for a comparison In the same period of 2008, India Inc raised Rs 2,104 by means of QIPs out of the total Rs 48,807 crore garnered from domestic sources, as per study by New Delhi-based SMC Capitals.
• QIPs became the god to the Indian corporate to the rescue them form cash-starved.
When we dig into other sources of fund raising we get:
• Foreign currency convertible bonds have seen a jump of over 50%.
• External commercial borrowings saw a dip of 45% as compared to the same period last year.
• The figure become more impressive when we look in the funds rose from ADR and GDR.
• 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.
• Rs 1.44 lakh crore raised by companies through domestic bond offerings in 2009 exceeded the 2008 number by nearly 48 per cent.
• IIFCL, the largest bond issuer, raised Rs 7,300 crore.
Now all these stories are now over and what is stored for 2010 is the next thought line coming into the minds of all of us:
• Around 44 Indian companies are aiming to raise about Rs 29,000 crore
• They have filed prospectus and are awaiting clearance from Sebi
• Apart from IPO, FPO will be another source from which funds will be raised by the Indian corporate
• Disinvestments are the biggest bomb shell to burst out in the 2010-11 financial year.
Above all these figures the total funds raised by Indian corporate from January to November 2009 is Rs 2,58,000 crore. The figure is lower by a meager number of 3000cr when compared to 2008 where India raised Rs.261000cr.
Now we would also like to know the sectors which have pulled all these funds which have been raised.
• Majority of the QIP funds found streets of financial services companies.
• The inflow was about 55% of the QIP funds.
• Inflow in to the street of consumer sector was 17%
• And last but not the least the Indian industrial sector pulled over 15% of the funds.
Financial sector growth happened due to all these funds which were raised via QIP. Now its quite hard and next to impossible to draw line regarding the volume of money that have been invested in to the equity market by these financial arms. Its quite difficult to say that 80% recovery of the Indian stock market did not happen completely on the basis of FII funds alone.
In between all these we also need to accentuate our attention towards the Indian banking loan segment. Many question rises among which the prime one is what contribution they did after the interest rates were kept lower and the loan extended by them towards Indian corporate.
• IN 2009, most banks reduced the loan rate for almost all their loan products.
• But the banks were skeptical towards providing loans in the first half of 2009.
• Teams selling unsecured individual loans like personal loans and credit cards were disbanded in large scale in many private and foreign banks.
• The same was true for NBFCs selling personal loans.
• The credit flow (y-o-y) to agriculture grew 19.9% as compared to 23.4% during the year ended October 2008.
• The industry drew 14.8% as against 37.4%.
• The services sector 6.3% as against 35.5%.
• The Central Banks objective was to reduce the overall risk in their loan portfolio.
• And this is the place where Indian banking segment left the hand of the Indian corporate.
In one part Indian banking segment played the correct role by not taking exposures like western banks in order to protect the hard earned savings of 120 billion populations.
But too much skeptical move made the initial days of the Indian corporate difficult.
Among all these the most interesting part is that Indian investors are very less attracted towards the IPO which have been issued in 2009.We have seen number of cases where the IPO failed to meet the expectation of the investors. One of the prime reason behind such a move is too much expectation and wrong pricing of the IPO followed with miss calculation in valuations. But all these factors do not rule out that the fate of IPO in 2010 will be same.
• All we need is the valuation to be reasonable and the expectation levels should not be over stretched so high that it never meets any ones goal.
• One more thing we need to keep in mind that what ever IPO comes in 2010 we need to pick them on long term valuation basis and not on the short term profit making polices or strategies.
• Look in to the long term value generating projects of the company. Then only one can reap the benefits over a longer time frame.
• Short term triggers might fill up your pocket but at the same time might help you to loose money too.
Author: – Indranil Sen Gupta
Financial, Economic Writer and Research Analyst
Author Bio
