India Inc plans $3.5-bn equity issues abroad
Sourav Mukherjee
MUMBAI 13 DECEMBER
INDIA INC is ready to storm the overseas equity markets. Fresh from the success of infotech companies, Indian corporates are lining up plans to raise at least $3.5bn through overseas equity offerings in Year 2000. This is more than half the $6.79bn raised by them since the first global equity float in 1992. Investment banking sources said that while four players — State Bank of India, Industrial Development Bank of India, Reliance Industries Ltd and Reliance Petroleum Ltd — are expected to raise $500m each, other big players like Mahanagar Telephone Nigam Ltd, Indian Oil Corporation, Satyam, Rediff, Wipro, NIIT and BharatiNet are expected to chip in with offers of $100-200m each.
Moreover, Satyam Infoway is also expected to visit the US market for the second time to part-fund its latest $115m take-over plan of IndiaWorld.
''There are many more infotech and Net companies that are eyeing $25-100m offerings that the total will easily cross the $3-bn-mark. Our estimate is around $4bn,'' said an investment banker. Small IPOs, sources said, will be triggered in companies where venture capital funds already have a stake and now want out.
The last time that Indian corporates flooded the equity market with almost equal pomp was in 1994. Corporates raised a record $3bn that year through global depository receipts (GDRs). However, this led to a huge overhang in Indian equities overseas and is cited as the single-largest factor behind the total lack of interest for Indian equity overseas for the next four years.
''This time, we have to be careful. Only companies with the fundamentals and growth plans should be allowed to tap the international markets. Indian equity is on a high after the success of Infosys Technologies and Satyam Infoway. It would be foolish to destroy that by allowing anyone access to these markets,'' said a banker.
In fact, after 1994, Indian corporates could raise only $304m, or one-tenth the amount in 1995. Although 1996 was slightly better ($1.33bn), the south-east Asian crisis and Pokhran almost destroyed all global equity raising plans of Indian corporates in 1997-98. This was until the infotech companies — Infosys Technologies and Satyam Infoway — came in and stormed Nasdaq through the American depository receipt (ADR) route. Term lending institution ICICI was the first from the country to list on New York Stock Exchange (NYSE).
Sources said that SBI, RIL, RPL and IDBI will be targeting the NYSE as the Nasdaq is perceived as an “infotech heavy” exchange.
Both the Reliance group companies are planning to convert their outstanding GDRs into ADRs. This will help set a better pricing when they raise fresh ADRs from the overseas market, said investment bankers.
On the other hand, SBI is likely to benefit from the fact that it already has a presence in the international market and that its Resurgent India Bonds (RIB) issue has raised a record $4.21bn from non-resident Indians (NRIs) in a difficult market. ''There is a large contingent of NRI investors waiting to buy into Indian stocks and SBI will be a favourite,'' sources said.
However, investment bankers said that the largest beneficiaries will be companies with initial public offerings. With no benchmark pricing, either in the form of a domestic share or a GDR, these companies are likely to be valued the highest if they are able to demonstrate good fundamentals and growth potential, said bankers.
''The real stocks to watch will continue to be the Wipros, Satyams and NIITs, although Rediff will also be a good test case,'' said bankers. ''Then there will be the flood of internet companies which are planning to raise $50m each to allow venture capitalists to exit,'' sources said.
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