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The year 2011 turned out to be a bad year for fund-starved corporate India. After raising record amounts in 2010, Indian companies' capital raising activity through equity- and debt-routes declined during the year ended December 2011.
According to the Bloomberg League tables, the equity raising (which includes public offers, rights issue, institutional placement and block deals) fell by 68 per cent year-on-year. The domestic loan and bond raising witnessed a year-on-year decline of 13 per cent and 10 per cent respectively.
The international bond markets which met the funding requirements of the companies in the first half of 2011 also dried up in the last few months. Sharp depreciation in rupee made this route unattractive. Risk aversion globally made lenders wary of emerging market borrowers. Foreign currency convertible bond issuances fell by 55 per cent this year.
Indian stock market was among the worst performing equity markets in 2011. This deterred public offers since companies can not get optimal valuation in such periods. The government too had to put off its disinvestment program due to unfavourable market.
In 2011, the money raised through initial public offerings (IPOs) route was the lowest since 2003. The money raised through IPOs in 2011 declined by 84 per cent year-on-year. L&T Finance Holdings which raised Rs 1245 crore was the largest IPO in 2011.
Fewer QIPs
Qualified institutional placement (QIP) has also witnessed fewer deals. The fund raising through QIP shrank by 86 per cent year-on-year. This amount is the lowest raised in a year since 2008.
With fewer fund raising deals, investment banking space is getting more competitive. Smaller investment bankers executed more deals than bigger players. For instance, Almondz Global Securities which had 0.1 per cent market share in 2010 improved its share to 5.9 per cent in 2011.
On a deal-per-banker basis as well 2011 was a multi-year low. The IPO deals were predominantly small ticket and an average 2.7 per cent fee per deal was charged by bankers, highest since 2005.
Higher interest rates domestically led to borrowers looking at foreign borrowings to reduce their interest costs. During the first three quarters of 2011 (January to September) India Inc's international bond issues doubled year-on-year. However the December quarter saw virtually no deals in international bond market as against almost $6.6 billion worth deals in December 2010 quarter. International loans grew at a modest 1.6 per cent year-on-year for the year ended December 2011.
As international funding tap dried up, the domestic bond market issuances grew at 48 per cent year-on-year.
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