INVESTORS LAP

MUMBAI: Overseas investors have a bigger appetite for equity offerings by Indian companies than local investors. Between April and August this year, the amount raised by India Inc through overseas issues, mainly global depository receipts (GDRs), is almost thrice the amount it raised during the same period last year.

According to data available with Prime Database, in FY07 (April-August) so far, corporates have raised $600m through 10 issues consisting of GDRs and other overseas equity offerings. In comparison, they had managed to raise $215m through 13 issues in the same period last year.

According to Ajaj Manglunia, senior vice-president (investment banking), SPA FinancialAdvisors, “The trend basically shows the bullishness among overseas investors. The appetite for Indian paper is increasing by the year and overseas investors are more comfortable now about Indian equity.” But in spite of the good interest in Indian equity, hybrid and other pure-debt instruments (FCCBs and ECBs respectively) still have the most preferred method for companies raising capital abroad.

Indian companies have been issuing GDRs and FCCBs/ECBs on a large scale since 1992. In 1995, the finance ministry changed laws to provide limited repatriation of the ADR/GDRs so that those instruments could be sold back in India. “The regulator had understood that the rules for raising capital in India were too stringent and hence it had allowed to raise more money in overseas markets through ADRs and GDRs,” said AA Sarma, head of merchant banking division at IDBI Capital.

“Companies go for listing equity abroad because they get some leeway with the regulations (compared to India) and since they get precious foreign currency in return. Besides, it doesn’t result in dilution of equity.”

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