Share market breaks 2007 record; India Inc raises more money so far this year than full year 2007

India Inc has managed to raise $32.7 billion in the first nine months of 2020 in the domestic stock markets, shattering the 2007 annual record of raising $31.2 billion from equity markets, data from Refinitiv showed. The fundraising was led by Mukesh Ambani’s Reliance Industries Ltd’s massive rights issue of $7 billion. However, it should be noted that investors of the issue have not paid the entire amount, but instead the payments will be made in a staggered manner. The massive $32.7 billion raised so far this year is 87.7% higher than the year-ago period.

Apart from Reliance Industries’ $7 billion rights issue, the other major capital raising efforts undertaken by India Inc include telecom major Bharti Airtel’s Qualified Institutional Placement (QIP) which saw the telco raise over $2 billion and troubled private sector lender Yes Bank’s massive fund raising in July and ICICI Bank’s fundraising from August this year. “A flurry of follow-on offerings totaled US$29.6 billion, up 94.1% from a year ago, and accounted for 90.4% of India’s overall ECM proceeds,” Refinitiv said. “On the other hand, initial public offerings (IPO) by Indian companies totaled US$2.1 billion in the first nine months of 2020, down 14.4% in proceeds from the same period last year, the lowest since 2015 (US$1.1 billion),” it added.

Among the industries raising funds, financials were at the forefront, raising 93% more funds when compared year-on-year basis. Banking and financial services sector fund raising was widespread as lenders continued to shore-up capital to dodge the economic headwinds that could be witnessed as the aftermath of the pandemic. These made up for 38.7% of the ECM activity, according to Rfinitiv. RIL’s fundraising helped the energy and power sector to take the second spot among industries while telecoms, consumer products, and retail were the other top sectors when it came to raising funds.

Most of the issues so far this year are follow-on offers, followed by initial public offerings or IPOs. Apart from equity markets, debt markets have also acted as a major source of funding for India Inc so far this year. “Primary bond offerings from India-domiciled issuers amounted to US$52.1 in the first nine months of 2020, a 24.6% decline in proceeds after a strong period last year, but still elevated compared to historical levels,” the report said.  Novelis Corporation launched a $1.6 billion bond offering in January this year, the largest so far this year. State-run telco BSNL raised $1.2 billion from a government guarantee bond. 

During the pandemic struck year, so far, Merger & Acquisition activity has fallen to a three-year low and reached$68.0 billion in the first nine months of 2020, a 1.5% decline compared to the first nine months of 2019. ““As the disruptions brought by the COVID-19 pandemic remains a concern for companies and the economic cost caused by widespread lockdowns continue to provide uncertainties, deal making activity in India fell to a three-year low during the first nine months of this year. However, third quarter activity witnessed recovery as deal value grew 72% sequentially after the second quarter fell to its lowest quarterly levels since 3Q 2017,” said Elaine Tan, Senior Analyst at Refinitiv. Further, on equity market capital raising Tan added that “this momentum could potentially continue as companies shore up cash to protect their balance sheets and improve liquidity.”