Companies in India raise capital on fears of third wave

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Several corporates, especially in sectors severely hit by the pandemic, are raising additional capital to bolster their balance sheets and prepare for a potential third wave of the pandemic that could cause further disruptions to business.

While the trend is more visible in consumer-facing sectors such as civil aviation, tourism, retail and automobiles, experts say that more companies are likely to initiate fundraising efforts.

InterGlobe Aviation Ltd, which operates IndiGo, approved a plan in May to raise 3,000 crore by selling shares to institutional investors. India’s largest airline plans to raise an additional 4,500 crore by securing credit lines from lenders and entering into sale and leaseback (SLB) pacts with aircraft lessors to gather funds as it expects revenues to be hit and cash burn to continue in the June quarter.

IndiGo’s consolidated loss widened to 1,147.16 crore in the March quarter from 871 crore a year ago. Net debt swelled 31.4% from a year ago to 29,859.7 crore as of March-end, while cash balance fell 8.9% to 18,568.5 crore in the same period.

IndiGo’s chief executive, Ronojoy Dutta, said the main purpose of the fundraising is contingency planning in the event of another covid wave. “We are planning a QIP as a standby. We have a cash threshold in mind that we don’t want to fall below,” Dutta said in an interview on Wednesday.

“Even in the most pessimistic of scenarios, we will not cross the cash threshold. The QIP is not for working capital but more for disaster management if such a scenario does occur,” he added.

Meanwhile, Wadia Group-controlled Go Airlines (India) Ltd, which runs the GoFirst budget airline, began the process of becoming the fourth listed carrier in India as it filed a draft prospectus with the market regulator for an initial public offering (IPO) to raise as much as 3,600 crore. The share sale is an attempt by the promoters to raise funds to weather the pandemic. “The IPO will place us perfectly when the market rebounds,” the airline’s vice-president, Ben Baldanza, said in an interview last month.

Several automakers who faced major business disruptions due to the last two waves of the pandemic have been readying contingency plans to deal with any future emergency. The companies have also asked dealers and parts suppliers to run operations on a tighter budget and reduce variable costs. As a precautionary step, most automakers are also asking vendors to increase the inventory of parts in case of lockdowns in the future.

“After the last lockdown, demand came back swiftly, and the recovery sustained for about six months till March 2021,” said a senior auto industry official, who spoke on condition of anonymity. “So, financially, most auto companies are better off as they made profits in Q3-Q4 of FY21, but the need of the hour is to conserve capital,” the official said.

Meanwhile, the movie exhibition business, one of the sectors worst hit by the pandemic, has seen top multiplex chain operators raise capital for working-capital needs and to repay loans. Earlier this week, Inox Leisure Ltd, the second-biggest multiplex chain operator, launched a 300 crore share sale to strengthen its balance sheet.

“Clearly, companies are looking to raise capital, given the uncertain environment around the next wave and impact on cash flows; so they would rather raise equity than debt, even though debt is easily available. Also, stock market valuations are very attractive currently for issuers, and investors, too, are keen to lap up quality companies. So, we see a very strong pipeline of fundraising activity in the next few months,” said Ajay Garg, founder of Equirus Capital, a Mumbai based investment bank.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.