In last few months, quite a few Indian business houses embarked upon fund raising for one reason or the other. Some businesses raised funds for debt financing needs, some needed operation cash, some needed working capital, some need for growth needs, and many needed it little bit for everything. Furthermore, the method adopted by business houses have been varied such as qualified institutional placements (QIPs), american depository shares (ADS), global depository shares (GDS), non-convertible debentures (NCDs), asset sales, stake sales, and public offering (IPOs). In general the response has been tremendous and quite a bit of capital was/is being committed by all the participants, including retail investors like you and me.
In April/June 2009 timeframe, it is estimated that a total of $24 billion was raised by Indian companies, while it is estimated that $30+ billion was raised in first six months of 2009. Now this is just the amount raised and does not include the amount committed. The table below shows the some the companies that have gone to capital markets for raising funds. It is not comprehensive but shows the level of capital raised in foreign markets, and in Indian markets.
In very simple terms, Non Convertible Debentures (NCDs) are a loan to the company issuing it. This loan, or NCDs, cannot be converted into equity. Public or Private companies issue NCDs to fund many activities such as growth plans, corporate expenses, pay out earlier loans, working capital, etc. I consider NCDs as a form of private or public sector bonds, depends upon who issues it.
Interpreting Corporate Events of Raising Capital – Background Summary
The way Indian economy has bounced back from 2008 downturn, it has continuously fueled the sense of optimism. In the eyes of developed countries in west, India may be corruption ridden, India may not replicate China’s infrastructure, India may have slow decision making, India is in politically sensitive region, and many more negative connotations. China had been benchmark for western world. But bottom line is, the bounce back from 2008 has proved to the debt ridden western world, structurally, India has sound economic and governance system. The democracy makes it slow, but it provides freedom and openness. It may not be the best as per the western standards, but it is free and open society (ignoring occasional nuisances from regional groups). What does this have to do with individual investing?
This optimism fuels growth of economy, growth of businesses, and capital investments. Folks who are optimistic, and believe there is ROI for their capital, they are willing to invest money in businesses. And where there is investment, there will be investors like you and me. Continue reading rest of this article…