Indian corporates managed to raise around Rs 10 lakh crore through equity and debt in 2020 as India, due to its low-interest regimes, tapped the low-cost funding options from most of the developed markets flooded with cheap credit.
Domestic corporates garnered Rs 9.85 lakh crore collected till December 15 2020 - out of which Rs 7.3 lakh crore was collected from the debt market; Rs 2.46 lakh crore came from the equity market; nearly Rs 7,100 crore arrived through the overseas route - showed data compiled by Prime Database.
Of the total Rs 7.3 lakh crore raised through Indian debt markets, Rs 7.23 lakh crore came from private placement, while the rest Rs 7,167 crore came through public issuances.
Benign capital markets, not-so-expensive credit avenues, and the scramble to build a liquidity war chest to fight coronavirus-induced slowdown also helped domestic companies' bullish trajectory, which is likely to continue until next year.
As per experts, Indian corporates found debt route more attractive for multiple reasons like that there won't be a dilution of promoter equity.
Arjun Yash Mahajan, Head of Institutional Business, Reliance Securities told PTI, "Lockdown and social distancing norms affected a large number of projects. Further, a large number of companies announced fresh capacity expansion and a number of infra projects are likely to start in near term. Hence, fund mobilisation is expected to be higher in next year."
V Jayasankar, Senior ED and Head (ECM), Kotak Mahindra Capital Company, said that a slew of factors such as the faster economic recovery, COVID-19 vaccine's positive developments, availability of sufficient liquidity for emerging markets, including India, would prompt corporates to take advantage of benign capital market conditions and to fund growth plans in next year.
Indian corporates, in 2019, raised Rs 10.6 lakh crore, including Rs 3.3 lakh crore through equity and Rs 7.28 lakh crore through debt.
Fresh capital has been gathered to create a war chest of liquidity, fund growth, expansion plans and refinance high-cost debt, while a large amount raised from IPOs went to the shareholders and promoters.
Ajay Manglunia, MD and Head of Institutional Fixed Income, JM Financial said, "Any borrowings done in the recent few months are more to do with refinancing high-cost debt or creating a war chest of liquidity for use as demand comes back to the table."
Nikhil Kamath, Co-Founder and CIO of True Beacon and Zerodha said that companies preferred debt route as it doesn't dilute the promoter shareholding, hence preserve interest.
Funds in the equity market came mostly from the issuance of shares to institutional investors and rights issue mode.
Within the equity segment, Qualified Institutional Placement (QIP) route helped mop up Rs 79,086 crore, IPOs added Rs 26,472 crore, including for SMEs, preferential issue of shares got Rs 39,484 crore, rights issue of shares to existing shareholders accounted for Rs 64,984 crore and Offer for Sale (OFS) through stock exchange mechanism contributed Rs 21,256 crore. The share of Follow on Public Offer (FPO) was at Rs 15,024 crore.
A total of 14 main-board IPOs garnered Rs 26,313 crore, and Small and Medium Enterprise (SME) IPOs brought in Rs 159 crore. In comparison, Rs 12,365 crore raked in through main-board IPOs, while Rs 624 crore via SME segment in 2019.
Besides, YES Bank took the follow-on public offer (FPO) route to mop-up Rs 15,000 crore this year, while SME raised Rs 24 crore through the route.
Mahajan added, "A number of IPOs were already lined up before economy felt the jolt of pandemic and they had to defer due to lockdown. As equity markets rebounded led by better prospects of earnings and huge fiscal stimulus offered by the government, IPOs started seeing investors' interests."
Kamath said retail investors have shown a high degree of interest in IPOs and the trend is likely to continue in 2021.
The IPO chart in this year was led by SBI Cards and Payment Services Ltd (Rs 10,355 crore), followed by Gland Pharma (Rs 6,480 crore) and CAMS (Rs 2,240 crore).
Interestingly, 2020 also saw most of the IPOs opening with a premium over the issue price suggesting strong investors' appetite. IPOs like Route Mobile, Happiest Minds Technologies, Rossari Biotech and Gland Pharma clocked impressive gains ranging up to 200 per cent since listing.
Moreover, IPO activity is expected to further accelerate in 2021 as investors are keen to invest in quality companies across multiple sectors, Jayasankar said.
Apart from public issues, equity raise through QIPs and rights issues together hit a record level of Rs 1.5 lakh crore supported by the accessibility of abundant liquidity.
Fund collection through QIP mechanism more than doubled to Rs 79,086 crore this year from Rs 35,238 crore through the mode in 2019.
Fundraising through QIP route in 2020 was majorly dominated by financial institutions and banks. Among the major QIPs issuance were ICICI Bank raising about Rs 15,000 crore, Bharti Airtel (over Rs 14,000 crore), HDFC (Rs 14,000 crore), Axis Bank (Rs 10,000 crore) and Kotak Mahindra Bank (Rs 7,442 crore).
Jayasankar said raising of 'COVID capital' was seen across sectors.
Primary capital raised during the last couple of quarters have been termed as "COVID capital" wherein equity that was raised were used to strengthen the balance sheet to overcome any financial stress due to COVID-19 and also to take advantage of growth opportunities available.
Besides, firms mobilised Rs 64,984 crore through rights issue this year, which was higher than Rs 52,053 crore raised in 2019.
Reliance Industries contributed the lion's share, with its Rs 53,124 crore through rights issue. This was also the country's largest-ever rights issue.
However, capital garnered through preferential issuance of equity shares plunged to Rs 39,484 crore in 2020 from Rs 2.04 lakh crore in the preceding year. Also, funds collection via OFS route -- used for dilution of promoters' holdings -- fell to Rs 21,256 crore this year from Rs 26,000 crore in 2019.
(With input from agencies)