Indian Share Sales May Surge in 2010, Citigroup Says

Feb. 19 (Bloomberg) -- Indian equity and equity-linked offerings may jump by as much as a third this year as companies and the government tap a growing pool of domestic capital and the economy recovers, according to Citigroup Inc.

Indian companies may raise $25 billion to $30 billion in share sales in 2010, up from $22 billion last year, said Ravi Kapoor, head of capital markets and origination for South Asia at Citigroup.

“If liquidity keeps coming into the market the way it did last year and equity markets continue to perform, we could possibly cross over $30 billion in primary issuance,” Kapoor said in a Feb. 17 interview in Mumbai.

Two-thirds of the equity capital Indian companies raised last year was from domestic offerings, according to data compiled by Bloomberg. The pool of local capital has grown as insurance companies and mutual funds pour more money into the equity market, said Kapoor, whose bank was the top arranger of domestic stock sales in India in 2009.

The Sensitive Index rallied 81 percent in 2009, making it the third-best performing benchmark in Asia, as the economy weathered the global recession and stock purchases by foreign investors rose. The gauge has fallen 6.5 percent this year.

Real-estate companies, power generators, telecommunication tower operators and insurers may lead equity sales this year, Kapoor said. The government may sell stock worth $10 billion to $15 billion this year, he estimated.

Local Liquidity

The government will sell a 5 percent stake in Rural Electrification Corp., a state-owned lender for power projects, starting Feb. 19, and plans to offer an 8.4 percent stake in NMDC Ltd., India’s largest iron ore miner, next month.

Domestic investors have become an increasingly important source of funding for companies seeking acquisitions overseas, while foreign-currency credit markets remain subdued compared with before the global financial crisis, Kapoor said.

“Recent trends show that Indian corporates have been relying on local liquidity,” he said. “The Indian market understands the risks and the credit worthiness of Indian companies better.”

The International Monetary Fund said last month that banks may need to significantly increase their capital to support the credit recovery and help sustain economic growth. Restarting credit flows remains a “major challenge,” said Jose Vinals, director of the IMF’s monetary and capital markets department, at a briefing in Washington.

“From corporate India’s point of view, they’re in a very sweet spot to raise money between domestic and international capital offerings depending on their requirements,” Kapoor said.