India Inc’s debt piles up

Mumbai: India Inc raised a staggering over Rs1.33 lakh crore from markets in the first two months of the current fiscal (2015-16), with debt emerging as the most preferred route. An analysis of funds raised through various channels showed that companies have together mopped up fresh capital worth Rs 1,33,241 crore through equity and debt.

A large chunk of this more than Rs1.06 lakh crore came from debt market while Rs 27,032 crore has been mobilised through the equity route. These funds have been raised mainly for expansion of business plans and to support working capital requirements.

“The economic activity is picking up the momentum and companies need fresh capital for their expansion plans. So capital raising is inevitable in this environment. More-over, there are fears about US Federal Reserve increasing interest rates during the second half of this financial year, which will lead to a spike in bond yields across the world. So firms are trying to raise as much funds as they can before bond yields start firming up,” said Jagannadham Thun-uguntla, head of fundamental research at Karvy Stock Broking.

In the equity segment, money was raised through the preferential route (Rs15,891 crore), followed by rights issue (Rs 7,498 crore), initial public offers (Rs1,885 crore) and qualified institutional placements (Rs1,758 crore). In the debt market, the companies raised over Rs 1.05 lakh crore through debt placement while public issuance of debt securities accounted for just Rs329 crore. In 2014-15, firms had raised a total of Rs4.80 lakh crore from equity and debt markets compared with Rs3.92 lakh crore in the preceding fiscal.

Rate cuts are key, not reforms: BofA

Indian markets are “over-rating” the contribution of the pending GST and land acquisition reforms to the growth and it is rate cuts by RBI which actually hold the key for an immediate recovery, Bank of America Merrill Lynch said on Tuesday. In a research report, the financial giant also said it is not very hopeful of these two reforms getting passed in the upcoming monsoon session of Parliament given the “political controversies”, while it expressed hope that RBI would cut its rate by 25 basis points in its Aug-ust 4 review meet and by further 25 basis points by early 2016.

Firms to see poor quarter

India Inc is expected to register yet another quarter of dismal performance as softening of commodity prices, weak growth in investment linked sectors and subdued rural demand is likely to hit companies earnings growth. According to rating agency Crisil Research, continued weak performance of investment linked sectors and companies impacted by low global commodity prices would curb even the moderate growth anticipated in export-oriented and consumer driven sectors. India Inc’s earnings before interest, taxes, depreciation and amortisation expenses are expected to see a dip of 0.70 per cent on a year on year basis.

“Our analysis of 600 companies (excluding fin-ancials and oil & gas), wh-ich account for 70 per cent of overall market capitalisation, shows only a mild 3 per cent uptick in revenue growth. Sequent-ially, this will be 2.3 per cent more than the 0.7 per cent seen Q4,” it noted.