With $10.1 billion, India tops emerging markets equity fundraising in 2017
India is the biggest equity fundraising market among emerging countries so far this year since January, ahead of China, South Korea and Brazil. According to Bloomberg data, about $10.1 billion has been raised through Indian equity capital market (ECM) deals, which include initial public offerings (IPOs), follow-on public offerings (FPOs), qualified institutional placements (QIPs) and block deals.
China is second in the table with $9.54 billion while South Korea is in third position at $6.77 billion. India has almost equalled the $10.2 billion raised all of last year in just six months and bankers expect to end the year with a record $25 billion in equity deals. Indian stocks have been achieving new milestones in 2017 thanks to the flood of foreign and domestic flows. Among all countries, India ranked sixth after the US, Canada, UK, Japan and France in equity fundraising since January. In 2007, when Indian markets were also on a record-breaking spree, domestic companies raised $23.38 billion.
Foreign funds have been bullish, investing in big-ticket IPOs and QIPs thanks to political stability, continued reforms, a strong currency and the expectation of a recovery in earnings in the next few quarters, said bankers. Several foreign institutions that haven’t invested in India before have entered the market, said V Jayasankar, head of equity capital markets, Kotak Investment Banking.
“Pension and sovereign funds have shown interest for investing in India of late through IPOs and QIPs on expectations of much better corporate earnings growth over the next couple of years aided by lower interest rates and continued bold reforms by the government,” he said. “We are looking a record high of over $20 billion of equity raising in the current year aided by strong flows from FPIs (foreign portfolio investors) and domestic institutional investors (DIIs).”
Despite a slowdown in the March quarter, the economy is still among the fastest-growing in the world, making India a bright spot in an uncertain global scenario.
“The Indian economy is growing much faster than many other emerging markets and it’s quite natural that money is chasing Indian equities,” said Vinay Menon, head, equity capital markets, JP Morgan India.
Indian companies have raised nearly Rs 13,800 crore so far though IPOs and FPOs and nearly Rs 34,000 crore through QIPs so far in the current calendar year, according to Prime Database. Two infrastructure investment trusts have raised about Rs 7300 crore in the current calendar year.
Attractive valuations and favourable liquidity conditions are tempting many companies to raise funds, said bankers. “As a growing economy, India has a high capital absorption capacity,” said Ravi Sardana, executive vice president at ICICI Securities. “While there is an increase in the number of issues, what is heartening is the increase in the size of the transactions.”
Earlier this month, State Bank of India’s Rs 15,000-crore QIP was oversubscribed, with demand exceeding Rs 27,000 crore. Last Wednesday, Federal BankBSE -2.17 % successfully raised Rs 2,500 crore through a QIP. IPOs exceeding Rs 1,000-crore in the last three years have given average listing gains of 26 per cent with returns till date at 77 per cent on average. Since April 2014 foreign institutional investors and mutual funds have invested over $56 billion in India equity capital markets.
Domestic funds have also been active in the last few years. Equity funds including equity-linked savings schemes (ELSS) saw net fund flows of Rs 50,000 crore alone between October and March. Nearly 600,000 accounts were added every month with an average ticket size of Rs 3,200 per account in FY17.
Moreover, the last fiscal year also saw Rs 44,000 crore being collected through systematic investment plans (SIPs), indicating a monthly run of Rs 4,000 crore.