Even as the corporate earnings are yet to pick up and economic activity still at a slow pace, Indian companies are already raising money. According to Prime Database, the primary market research firm, firms raised ₹17,866 crore in the first half of FY16, which is a five-fold jump year-on-year. Further, this is the highest in the last eight years over the same period.
Devil in detailsOn the face of it, the total amount raised gives an impression that finally India Inc is on a capex drive. But the devil is in the details.
Only 16 per cent of the money raised has been through fresh issue of shares. .
In other words, ₹14,949 crore or roughly 84 per cent of mop-up will not go to the company raising money. Also, total number of companies at 46, collectively through IPOs and OFS raising money, has not jumped compared to 40 in the same period last year though number of companies at 39 raising through IPOs has jumped significantly from 25.
Further majority of the IPO money has been raised by 12 companies, while IPOs by small and medium enterprises have been meagre. Only seven companies raised funds through OFS, which is almost half of what happened last year. OFS money is a more important figure to look at than IPO money as the former is triple the size of the latter. While ₹4,950 crore by way of IPOs in the first half is at a four-year high, ₹12,916 crore, it was mainly through PSU disinvestment (₹12,733 crore). However, the Government has an ambitious target of ₹70,000 crore this fiscal.
RBI FY15 Annual Report suggested that the government should frontload its disinvestment programme to forestall cutbacks in capital expenditure to meet deficit targets. However, the government has been unable to do the same.
IPOs in pipeline
As regards IPOs, 19 companies are planning to raise ₹11,545 crore and are holding SEBI approval, while 17 companies intending to raise ₹6,795 crore have filed with SEBI and are awaiting approval, Prime Database said.