Indian cos mop up close to `10 lakh crore in 2020

New Delhi: Not-so-expensive credit avenues, benign capital markets and the scramble to built a liquidity war chest to fight pandemic-induced financial woes saw Indian companies mopping up close to Rs 10 lakh crore through equity and debt in 2020. And the bullish trajectory is expected to continue next year too.

With most of the developed markets awash with cheap credit, thanks to low interest regimes, entities from emerging markets like India tapped the low cost funding options.Debt route turned more attractive for many Indian corporates for multiple reasons, including that there won't be dilution of promoter equity, according to experts.

"Lockdown and social distancing norms affected a large number of projects. Further, a large number of companies announced fresh capacity expansion and a number of infra projects are likely to start in near term. Hence, fund mobilisation is expected to be higher in next year," Arjun Yash Mahajan, Head of Institutional Business at Reliance Securities, said.

Out of the cumulative Rs 9.85 lakh crore garnered till December 15 this year, Rs 7.3 lakh crore was mopped up from the debt market, Rs 2.46 lakh crore came from the equity market and around Rs 7,100 crore through the overseas route, data compiled by analytics major Prime Database showed.

Of the total Rs 7.3 lakh crore raised through Indian debt markets, Rs 7.23 lakh crore came from private placement and Rs 7,167 crore was through public issuances.

V Jayasankar, Senior ED and Head (ECM) at Kotak Mahindra Capital Company said a slew of factors such as faster recovery of the economy, positive developments on the COVID-19 vaccine programme front, availability of ample liquidity for emerging markets, including India, would prompt companies to take advantage of benign capital market conditions to fund growth plans and deleverage their balance sheets in next year.

In 2019, firms raised Rs 10.6 lakh crore, including Rs 7.28 lakh crore through debt and Rs 3.3 lakh crore through equity.

Fresh capital has been garnered to fund growth as well as expansion plans, refinance high cost debt and create a war chest of liquidity, while a large amount raised from Initial Public Offers (IPOs) also went to the promoters and shareholders by way of sale of their respective holdings.

"Any borrowings done in the recent few months are more to do with refinancing high cost debt or creating a war chest of liquidity for use as demand comes back to the table,"

Ajay Manglunia, Managing Director and Head of Institutional Fixed Income at JM Financial, said.