Funds via ADRs, GDRs fall 98% in FY09

Funds via ADRs, GDRs fall 98% in FY09
The Financial Express, June 10, 2009, Page 2

Mahalakshmi Hariharan, Mumbai

Total funds raised by Indian companies through American depository receipts (ADR) and global depository receipts (GDR) have witnessed a sharp fall by 98.09% from $2.63 billion in 2007-08 to $0.05 billion in 2008-09.

The number of issues have also dropped from 13 in 2007-08 to 3 in 2008-09.

Further, the average depositary receipts (DR) size has reduced from $202.07 million in 2007-08 to $18.17 million in 2008-09. This signifies that the once high profile ADRs and GDRs went out-of-favour in 2008-09. Further, April 2009 has not seen any ADRs and GDRs, despite hopes of global economic recovery, noted Jagannadham Thunuguntla, equity head at SMC Capital.

Talking about external commercial borrowings, Thunuguntla noted that total funds raised through ECBs by Indian companies have fallen by 35.72% from $24.97 bilion in 2007-08 to $16.05 bln in 2008-09. There has even been a drop in the number of ECBs from 557 in 2007-08 to 458 in 2008-09. However, the average ECB size has slightly increased from $44.83 million in 2007-08 to $35.05 million in 2008-09, which signifies that even debt form of fund raising has become difficult for Indian companies in 2008-09 from abroad.

Further, April 2009 has seen just 25 ECBs raising $0.29 billion, signifying an annualised drop of -78.32% in 2009-10, as a comparison to 2008-09, he added.

The average ECB too has fallen to $8.17 million in 2009-10 from $35.05 million in 2008-09.

Talking about foreign currency convertible funds (FCCBs), total funds raised through by Indian companies have dropped by 75.29% from $5.99 billion in 2007-08 to $1.48 billion in 2008-09. The number of FCCBs has also fallen from 67 in 2007-08 to 20 in 2008-09, said Thunuguntla.

The average FCCB size has also decreased from $89.37 million in 2007-08 to $74.22 million in 2008-09.

“This signifies that the hybrid instruments with dual advantage of equity and debt has been used by high profile corporates such as Reliance Communications and Suzlon Energy, in 2007-08 has completely been shunned off in 2008-09,” noted Thunuguntla.

Further, April 2009 has seen only one FCCB of size $0.01 billion, signifying an annualised fall of -89.87% in 2009-10, as a comparison to 2008-09. Moreover, the average FCCB size has fallen from $74.22 million in 2008-09 to $12.50 million in 2009-10, he added.

The total funds raised from abroad through ADRs, GDRs, ECBs and FCCBs have fallen by -47.66% from $33.59 billion in 2007-08 to $17.58 bln in 2008-09.

Further, April 2009 has seen total foreign funding raised through high profile instruments such as ADRs, GDRs, ECBs, FCCBs to $ 0.30 billion, signifying an annualized fall of -98.29% in 2009-10, as a comparison to 2008-09.

“This signifies that Indian corporate is still continued to face difficult fund raising environment, despite significant global economic recovery,” he said.

Meanwhile Fund raising through several equity instruments such as rights issues, initial public offers (IPOs) and qualified institutional placements (QIPs) during the first two months of financial year 2009-10 has risen 412.75%, by over five-fold from Rs 931 crore to Rs 4,777 crore, more than than the fund raising during the first two months of financial year 2008-09.

Even though there are no IPOs and Rights issues during the first two months of 2009-10, there is a rush of QIPs from several corporates who otherwise are feeling severe cash crunch. This has resulted in healthy fund raising trend during the first two months of FY 2009-10, noted Thunuguntla, .

“With the IPOs are also expected to stage a comeback in the coming months, especially that of PSU IPOs, the fund raising trend in 2009-10 appearing to be healthy going forward,” he said.