FUND TRAIL $9 B RAISED, $15 B IN THE PIPELINE

INDIA Inc is on a fund raising spree, garnering $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April as companies, locked out from capital markets for almost a year due to the liquidity crisis, rush to finance growth plans.      Also, if the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million), according to Bloomberg data.      Most of these companies — from industries ranging from liquor and spirits to infotech — issued equity shares to a select group of investors by way of qualified institutional placement or QIP. According to bankers involved with such offerings, QIP is the fastest way to raise money, and accounted for $7 billion of the $9 billion raised since April this year. QIP involves selling ordinary rupee denominated equity shares to institutional investors, or the likes of mutual funds, pension funds and insurance companies. These shares are listed on Indian stock exchanges, the NSE and the BSE.      The other popular fund raising routes include foreign currency convertible bonds or FCCBs and American and global depository receipts (ADR/GDR), which represent underlying Indian shares. ADRs are listed on the New York Stock Exchange (NYSE) or the technology-focused Nasdaq, the two main US exchanges, while GDRs are listed on European exchanges.      On Friday, metal company Sterlite raised $500 million through bonds, which can be converted into ADRs after five years. Typically, FCCBs are convertible into equity shares listed on Indian exchanges. About $2 billion (Rs 9257 crore) were raised thorough the FCCB route in the past one month, indicating a revival of this market, which went into a coma following the global meltdown last year. FCCBs are traded between institutional investors abroad in the overthe-counter (OTC) market, where retail investors can't participate.      The companies which raised money through QIP include United Spirits, L&T, 3i Infotech and Parsvnath Developers.      "All the pent up demand for capital has come to the fore and corporate India wants to raise money at the earliest," said JP Morgan executive director and head of capital markets Vinay Menon. "Other capital raising options are time consuming and also carries costs, hence QIP is quite popular."      Among the fund raising options like share issue, QIP, GDRs, ADRs and FCCBs, QIP scores on low cost, faster timeframe and flexibility. It also doesn't involve procedural requirements such as submission of pre-issue filings to the market regulator.      United Spirits, the flagship company of the Vijay Mallya-controlled UB group, has raised around Rs 1,600 crore through QIP, after protracted negotiations with private equity firms KKR and Capital International fell through. Technology company HCL Infosystems raised Rs 500-crore through QIP, becoming the second company to come out with such a placement within two weeks.      A steady equity market also plays a key role in facilitating QIP. In the past month, Sensex grew 3.6% as indications of an economic recovery prompted investors to buy more shares. In the same period, shares of United Spirits surged 15%, while that of HCL rose 4.5%.      "Companies whose share prices have rallied in the recent past opt for QIPs as investors are more assured in a steady or rising market," says Siddharth Punshi, India head at Jefferies India. "It also depends on the company; if investors think that a stock has run up too high, then they may not be keen on participating in the issue. But if they think that a company has potential to rise further, then they will back it," he added. Some cos prefer covertible bonds to QIPs  BUT the preference for the QIP route is not universal. Firms like Sesa Goa, Sterlite Industries and Welspun Gujarat Stahl Rohren chose to raise funds through convertible bonds rather than QIPs as the former commands a premium, while the latter is often at a discount, said another banker. "The appetite for foreign investors to invest in credit-worthy Indian companies is huge. Many domestic peers would follow Sesa Goa and Welspun," said an executive of a foreign bank, who did not wish to be named.