India’s equity capital markets (ECM) activity hit an all-time high so far this calendar year and raised $32.7 billion during the first nine months of this year, up 87.7 per cent in proceeds from a year ago, surpassing the annual record set in 2007 ($31.2 billion).
This was driven by record follow-on offerings, which totalled $29.6 billion, up 94.1 per cent from a year ago, revealed Refinitiv’s latest report on India’s Investment Banking Review for first nine months of 2020. Follow-on offerings accounted for 90.4 per cent of India’s overall ECM proceeds.
“This momentum could potentially continue as companies shore up cash to protect their balance sheets and improve liquidity,” said Elaine Tan, Senior Analyst at Refinitiv, one of the world’s largest providers of financial markets data and risk management solutions.
Second quarter and third quarter follow-on proceeds saw the highest quarterly period on record. On the other hand, initial public offerings (IPO) by Indian companies totalled $2.1 billion in the first nine months of 2020, down 14.4 per cent in proceeds from the same period last year, the lowest since 2015 ($1.1 billion).
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Largest offering
Reliance Industries’ priced its $7-billion rights offering in June and the deal is now currently India’s largest-ever ECM offering, surpassing the previous record from ICICI Bank’s $4.6 billion follow-on offering in June 2007.
ECM issuance from India’s financial sector accounted for majority of the nation’s ECM activity in terms of proceeds with 38.7 per cent market share worth $12.7 billion in proceeds, up 92.9 per cent from a year ago driven by equity issuances from local banks ($7.6 billion). Energy & Power took second place with 21.6 per cent market share bolstered by Reliance Industries’ $7-billion rights offering. Telecommunications rounded out the top three sectors with 12.9 per cent market share of ECM activity.
JP Morgan leads the ranking for India’s ECM underwriting with $4.1 billion in related proceeds and 12.4 per cent market share. HSBC Holdings and BofA Securities take second and third place, capturing 9 per cent and 8.3 per cent market share, respectively.
“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 (July-September) activity witnessed recovery as deal value grew 72 per cent sequentially after the second quarter fell to its lowest quarterly levels since 3Q 2017,” Tan said.
Pandemic impact
While most of the sectors were affected, the pandemic has brought other new opportunities in deal making in the form of consolidations, privatisations, asset sales, as well as opportunistic acquisitions from both strategic and private equity investors especially in attractive sectors like technology and telecommunications, according to Tan
As the market responded to the needs and opportunities tossed by the crisis, Indian companies tapped the debt and equity capital markets leading to a surge in capital raising, according to Refinitiv.