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HOW DO FIRMS IN INDIA FINANCE THEMSELVES?

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 : 1999-91 TO 1995-96 (6 YEARS) NOW : 1996-97 TO 2002-03 (A-S)

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HOW DO FIRMS IN INDIA FINANCE THEMSELVES?

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

  2. A THEN & NOW STUDY THEN : 1999-91 TO 1995-96 (6 YEARS) NOW : 1996-97 TO 2002-03 (A-S) (61/2 YEARS)

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

  4. and by number…

  5. Rights issues route too has driedup…by amount

  6. and by number

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

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

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

  10. and by number

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

  12. or is for short-term working capital

  13. But debt is available only to < A rated issuances

  14. Lesser money is coming thru venture capital

  15. And fewer companies are being funded by VCs

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

  17. So have new commitments received by Indian VC funds

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

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

  20. and so have number of such projects

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

  22. Bridge Finance- almost non-existent now

  23. 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

  24. Leasing (NBFCs)- almost over now

  25. Fixed Deposits- almost over now

  26. Where does the FUTURE lie for firms????

  27. Private Equity- only to select, big, profitable firms

  28. Venture Capital- cautious, and as such restrictive

  29. Primary Market- scenario extremely grim

  30. 80 IPOs got SEBI approval, but could not enter marketSL. COMPANY ISSUE AMOUNT NO. (Rs.crore) ____ ______________________________ ______________ 1 ESKAY K'N'IT (INDIA) LTD. 300 2 FUTURE SOFTWARE LTD. 200 3 GODREJ SARA LEE LTD. 200 4 NIMBUS COMMUNICATIONS LTD. 182 5 PUNJAB NATIONAL BANK 164 6 PARAS PHARMACEUTICALS LTD. 150 7 UTV SOFTWARE COMMUNICATIONS LTD. 100 8 DATAMATICS TECHNOLOGIES LTD. 100 + 72 more

  31. Companies actively wanting to access capital marketTotal companies : 614Amount : Rs.112000 crore

  32. Other pending issuesTotal companies : 1693

  33. 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

  34. Revised entry norms for IPOs may help

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

  36. Private Sector Banks- some hope for borrowing

  37. ADRs/ GDRs/ SDRs- 100+ companies interested- international markets in a bad shape

  38. Pension Funds- uncertainty continues

  39. Thank You… but how will firms finance themselves ?prithvi@primedatabase.com

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