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Capital Raising by Bonds: What to make out of it?

TIP Guy 16 October 2010 bonds, Reader QnAs 16 Comments

Indian economy has left the recession concerns behind and showed resilience. The equity market indexes reflect this positive environment. FII’s are pumping money into markets and Indian economy. So why should our Indian companies remain behind? Shouldn’t they also try to get capital from different sources either by IPOs, QIPS, or equity, or bonds? And that’s what we are seeing these days. Every Indian company is trying to grab capital from financial markets. Some are raising capital by means of issuing corporate bonds!


As per an data published by AK Capital Services Ltd, in FY2009/10, public and private sectors combined raised close to Rs 172,000 crore of capital from Indian and foreign markets. In FY2010/11, this figure is expected to be Rs 350,000 crore i.e. almost double. Majority of this comes from foreign markets. I do not have exact numbers, my guesstimate is 80%+ comes from foreign markets.

Examples are: SBI, IDFC, Union Bank, L&T


One reader asked, why a company like SBI (i.e. a bank) issues bonds to raise capital? It is already in the business of collecting deposits from people?

Simple answer to this question is: Banks like SBI, need more money than they can collect from deposits. Continue reading rest of this article…

Herd Mentality in Current Fund Raising Environment

TIP Guy 19 September 2009 bonds, economy, markets No Comments

herd_groupIn 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.

Continue reading rest of this article…



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