HOW DO FIRMS IN INDIA FINANCE THEMSELVES? Conference on “Adapting India’s financial sector to a globalizing world” Goa 1 st November, 2002 Prithvi Haldea.

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Presentation transcript:

HOW DO FIRMS IN INDIA FINANCE THEMSELVES? Conference on “Adapting India’s financial sector to a globalizing world” Goa 1 st November, 2002 Prithvi Haldea PRIME DATABASE

A THEN & NOW STUDY THEN : TO (6 YEARS) NOW : TO (A-S) (6 1 / 2 YEARS)

Companies have not been able to raise money thru IPOs,which have nosedived… by amount

and by number…

Rights issues route too has dried up…by amount

and by number

Marginally more money could be raised thru GDRs/ADRs, courtesy the IT boom…

though the number of companies who could do it has fallen.

Debt private placements as a whole had risen dramatically,only courtesy SLUs and FIs… but even this is falling now,both by amount

and by number

Private sector is, however, raising more money. But most of it is either for retiring old expensive debt…

or is for short-term working capital

But debt is available only to < A rated issuances

Lesser money is coming thru venture capital

And fewer companies are being funded by VCs

In fact, number of VC funds investing in Indian companies has also declined sharply…

So have new commitments received by Indian VC funds

The bad news is that most funds are now investing in later-stage

Projects financed thru public issues are now non-existent. Aggregate values have fallen…

and so have number of such projects

Retail investors, who were acting as venture capitalists, have vanished…

Bridge Finance - almost non-existent now

Loans (Banks/FIs) - on one hand,the problems of NPAs - on the other, no lendable proposals or no lending despite rising deposits,courtesy CVC/CBI

Leasing (NBFCs) - almost over now

Fixed Deposits - almost over now

Where does the FUTURE lie for firms? ???

Private Equity - only to select, big, profitable firms

Venture Capital - cautious, and as such restrictive

Primary Market - scenario extremely grim

80 IPOs got SEBI approval, but could not enter market SL. COMPANY ISSUE AMOUNT NO. (Rs.crore) ____ ______________________________ ______________ 1 ESKAY K'N'IT (INDIA) LTD FUTURE SOFTWARE LTD GODREJ SARA LEE LTD NIMBUS COMMUNICATIONS LTD PUNJAB NATIONAL BANK PARAS PHARMACEUTICALS LTD UTV SOFTWARE COMMUNICATIONS LTD DATAMATICS TECHNOLOGIES LTD more

Companies actively wanting to access capital market Total companies : 614 Amount : Rs crore

Other pending issues Total companies : 1693

More problems for smaller IPOs - Regional Stock Exchanges in a disarray: problem for < Rs. 10 crore capital companies - Impractical 60% QIB guideline –not a single IPO till date under this

Revised entry norms for IPOs may help

Turnaround/ M & A Funds - when will they set up shop?

Private Sector Banks - some hope for borrowing

ADRs/ GDRs/ SDRs companies interested - international markets in a bad shape

Pension Funds - uncertainty continues

Thank You… but how will firms finance themselves ?