Companies raising funds to de-lever: George Mathew

Aug 04 2014, 02:26 IST
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SummaryRegulators worry that the asset-management industry may spawn the next financial crisis.

The rest of 2014-15 could witness around R50,000 crore of fund raising by Indian companies, believes George Mathew, CEO-India, Espirito Santo Investment Bank. In an interaction with FEs Devangi Gandhi, Mathew points out that unlike 2009-10 when capital raising was meant for new growth, this time around companies are using the funds to de-leverage. The second half of the year may see a visible revival in the initial public offerings, he believes. Excerpts:

There has been a slew of fund raising announcements this year. Do you think valuations are stretched for some of these deals given the leveraged balance sheets of some companies?

Companies had been postponing some of their capital raising plans because of low valuations and weak investor interest. That interest has come back post-elections and hence companies are going ahead with capital raising, with banks, financial and infrastructure space aggressively leading it. There is a need for capital for the real estate sector as well. Already around R25,000 crore of primary capital has been raised in H1 by listed companies, for the remaining part of the year we may easily see around R50,000 crore of fund raising.

Our view is that there is a renewed interest in India built around expectations from the new government. In general terms the markets have re-rated to an extent and now company performance has to justify further growth in valuations. For QIPs, given that there is a market reference price, investors have better opportunity to be convinced on valuations. From a demand side, we see more instances of capital raising to de-lever rather than for new growth, which was the driver in 2009-10.

Most companies are opting for follow-on institutional placements at this juncture. How soon can we see IPOs?

Companies that were prepared for coming out with IPOs have already hit the primary market (about two or three of them) even before the election outcome and in the run-up of the poll. But IPOs take a longer time to be prepared for and during the run up to the election not too many people have filed their DRHPs. IPOs typically take six to nine months from start to finish so given that it is a longer cycle and eventually we will see more IPOs in Q3 and Q4 of this calendar year.

The Sebi recently made key changes in IPO norms. How much of a boost this measure will give to the

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