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Billionaire Kotak's unit sees India share sales top 2017 record

Equity issuance in India next year will outdo 2017's record as a slew of companies take advantage of a booming stock market to raise growth capital, according to a top arranger of share sales in the nation

[MUMBAI] Equity issuance in India next year will outdo 2017's record as a slew of companies take advantage of a booming stock market to raise growth capital, according to a top arranger of share sales in the nation.

First-time share sales have raised more than 762 billion rupees (S$15.98 billion) so far, boosting total issuance to 1.95 trillion rupees, thanks to the rally that's made Indian equities one of Asia's best performers this year. The fundraising rush isn't showing signs of cooling, with three of the nation's biggest companies - Housing Development Finance, HDFC Bank and Tata Steel - announcing plans last week to raise as much as 413 billion rupees.

"When the market is open, one should raise money instead of trying to time it to perfection," said V Jayasankar, head of equity capital markets at the investment banking unit of Kotak Mahindra Bank. The streak may extend as companies seek to wrap up sales before interest-rate increases in the US or geopolitical tensions "turn this benign market volatile", he said in an interview.

Kotak Mahindra is the biggest arranger for share sales in the country after Citigroup, and takes the lead when it comes to helping financial services companies raise funds, data compiled by Bloomberg show.

The unprecedented rush of share sales signals a revival in corporate investment as India's economic expansion accelerates after slowing for five straight quarters.

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Loan growth to companies has recovered from the 25-year low reached in March, a boon for Prime Minister Narendra Modi, who has pledged trillions of rupees to upgrade infrastructure and bolster state-run banks' finances in an effort to stoke private spending.

While this year's share sales were mostly driven by founders and private equity funds paring their holdings, the proportion of companies raising money to expand their businesses will be greater next year, Jayasankar said.

Tata Steel, which plans to raise as much as 128 billion rupees, said Dec 19 that it would use the money to build and buy mills as well as repay debt. Mortgage lender HDFC said it will use part of the proposed 130-billion rupee offering to "explore opportunities" in health-insurance and for debt financing of affordable housing projects.

Punjab National Bank, Union Bank of India and Syndicate Bank together sold 81.5 billion rupees of shares to institutional investors this month, signalling improved access to the capital markets amid steps taken by the government to resolve bad debts problems.

"Investors are willing to invest as they believe that bad loans will come under control," Mr Jayasankar said.

Bandhan Bank, ICICI Securities, National Stock Exchange of India and HDFC Asset Management are among financial-services companies seeking to list next year, according to filings and people familiar with the transactions.

Still, some trends may diminish investor appetite for new listings.

While more than 150 companies - from an online matchmaker to a poultry provider - began trading on domestic exchanges this year, more than a quarter of the newbies are languishing below their sale prices, data compiled by Bloomberg show.

With an estimated price-to-earnings ratio of 22, the benchmark S&P BSE Sensex is also the most expensive in Asia, thanks to local investors embracing stocks amid falling returns from gold and property. Yet, new issuance have kept the market from overheating by soaking up the gush of liquidity, Jayasankar said.

"This year saw inflows of about US$24 billion into Indian markets from local and overseas investors, all of which has been absorbed by an equivalent infusion of fresh paper, thereby helping mitigate the risk of an asset bubble," he said. "We expect the same trend in 2018."


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