Business Daily from THE HINDU group of publications
Friday, Jun 30, 2006
Corporate - Overseas Borrowings
India Inc goes on capital raising spree abroad
Setting new record
Till May, Rs 17,722 crore was through FCCBs.
Equity offerings during the period totalled Rs 6,898.49 crore.
New Delhi , June 29
With hardening interest rate trends visible since early this year, India Inc is flocking to overseas markets to raise capital like never before. Within the first five months of this calendar year alone, domestic firms have raised a record Rs 35,135.83 crore through overseas issues including equity, debt and hybrid issues surpassing the previous high of Rs 34,374.84 crore raised overseas by Indian companies during the whole of 2005.
According to data compiled by Prime Database, there were a total of 77 overseas issues by Indian firms till May this year (initial offerings) adding up to Rs 35,135.83 crore, of which Rs 28,237 crore could be termed as debt raised through 45 foreign currency convertible bonds (FCCB) and four plain bond issues. There were 28 equity offerings by Indian firms abroad during the period totalling Rs 6,898.49 crore.
Biggest FCCB issuers
In comparison to the first five months of the current year, the overseas debt and hybrid issues raised during the whole of 2005 was cumulatively valued at a much lower Rs 20,946 crore. Equity offering by Indian firms abroad was higher at a cumulative Rs 13,429.66 crore during 2005.
According to analysts, Indian companies, in comparison to their other Asian counterparts, are already among the biggest FCCB issuers during this year, with a total of Rs 17,722.04 crore ($3958.68 million) raised through FCCB issues alone till May.
Major companies that have raised funds abroad this year include Ranbaxy Laboratories ($400 million), Jubilant Organosys ($200 million), Mahindra & Mahindra ($200 million), India Cements ($75 million) and Larsen & Toubro ($100 million).
Besides, sugar producer Bajaj Hindustan Ltd, in January, raised $255.6 million through an issue of global depositary receipts and convertible bonds, Dhampur Sugar raised close to $54 million from a GDR issue, while Rolta India Ltd raised $90 million through the issue of GDRs.
According to market analysts, the rush for FCCB issues is driven clearly in light of cheaper funds abroad and the trend is likely to gain momentum.
Mahindra & Mahindra's 5-year tenor FCCB issue of $200 million in April this year had a yield-to-maturity (or the premium to be paid at redemption if the bonds are not converted into equity) of 5 per cent per annum while Ranbaxy's $400 million February 2006 FCCB issue, again with a 5-year tenor, had a YTM of 4.8 per cent per annum, much cheaper than the rates at which debt can be leveraged in the domestic markets.
According to a market analyst, a host of PSUs, including blue-chip ones such as state-owned NTPC Ltd and Nuclear Power Corporation Ltd, that have lined up floats to raise capital as part of their borrowing programme from the domestic market are offering 8.5-9 per cent for 10-year maturity, while banks are offering 8-8.5 per cent for one-year bulk deposits.
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