Corporate India fund raising slumps 50%

Though around 85 companies had approached Sebi to mobilise over 65,000 crore by 2010 end,many of them are yet to see the light of the day. The steep decline in share sales by public sector companies was another reason for the slump in mobilisation.

The debt market continued to show a slump in domestic bond issuance for the second consecutive quarter.

“The number of deals reduced by 44 per cent while the volume decreased by 37 per cent. This can be clearly observed in the amount mobilised by debt issuance which fell drastically from Rs 1,08,900 crore in the first half of 2010 to Rs 69,000 crore in the same period this year,” says data compiled by Bloomberg’s India Capital Market League.

There was a massive downturn in fund raising via (QIPs) during the first half of 2011. The first half of 2011 witnessed a total of Rs 3,000 crore raised through four issues compared to Rs 11,400 crore in 25 issues during the same period last year.

Crisil Equities analysed that while two-thirds of QIPs are trading below their offer price,almost half are trading at least 25 per cent lower.

In absolute terms,the market value of the funds mobilised through QIPs has eroded by 5.3 per cent to Rs 21,300 crore. Real estate,construction,IT and ITeS,and textile sectors,which raised Rs 3,080 crore,have seen 31 per cent erosion (maximum) in the value of funds mobilised with most of the stocks trading 30-50 per cent below their offer price.

Analysts attribute the general slowdown in project investments and the volatility in the stock market for the fall in fund mobilisation. The Sensex which was at 21,108 in November 2010 fell to 17,7295 by February 2011 and closed at 18,762.80 on July 1.

“Besides,the rise in inflation,soaring interest rates and slower growth rate upset the mobilisation plans of corporates. The fall in mobilisation means less investment in the coming quarters,” said an analyst with an investment bank.

India Inc’s borrowing for the 2011 first half totaled $ 36.5 billion. This was a 17 per cent decrease from $44.2 billion in the first half of 2010. The total number of loans closed at 104 deals,a 3 per cent increase compared to 2010 first half,Bloomberg said.

In the IPO segment,the financial sector which was the largest contributor to funds raised during the first half of 2010 with a 23 per cent share,witnessed the maximum activity again contributing to 49 per cent of the capital raised during the first half of 2011.

Lagging behind

* The first half ended with a total mobilisation of Rs 31,500 crore from 41 issues against Rs 62,400 crore in the same period of last year

* The amount mobilised by debt issuance fell drastically from Rs 1,08,900 crore in the first half of 2010 to Rs 69,000 crore in the same period this year

* A total of Rs 3,000 crore was raised through four qualified institutional placements issues compared to Rs 11,400 crore in 25 issues during the same period last year