#firstwatercap

We believe that infrastructure will be at the centre of the Finance Minister’s agenda when she presents the Budget on Tuesday.

 We expect the measures to not only focus on addressing existing bottlenecks faced within the sector but also to provide a further boost to the Public-Private Partnership model. Specifically, we expect that the Hybrid Annuity Model (HAM) used in the construction of roads and water projects etc, to be made more viable for developers and it may be extended to additional kinds of projects.

 Upgradation of port infrastructure expected

 Given the current environment where we are experiencing inflation sparked by rising freight costs and supply-chain inefficiencies, every move that streamlines the time to market will be welcomed. As a part of this, we expect an upgradation of port infrastructure and possibly privatisation that will help improve efficiencies. Likewise, there may be incentives for the warehousing sector that could encourage private investment. This may even cover agriculture, which is currently plagued by inefficiencies owing to the overarching dominance of the Food Corporation of India.

 Railway infrastructure likely to get a major boost

 The railway infrastructure will likely see a major boost with the key themes being modernization, upgradation, and indigenisation. There is also likely to be an increased allocation towards high-speed trains, not only on the passenger side but also on the freight side, with a view to improving the competitiveness of the railways. The Finance Minister may also announce a roadmap for the rationalization of the numerous entities under the Ministry, and perhaps propose some consolidation.

 Incentives for Oil & Gas infrastructure

 Another key area is likely to be Oil and Gas, with attention focused on reviving the Exploration and Production sector, which has been plagued by insufficient investment during the recent downcycle in the oil market. Given the soaring natural gas prices, we could see the Finance Minister fostering a more conducive environment with suitable incentives for Coalbed Methane Blocks and other coal to gas initiatives. This is extremely important, not just to reduce dependence on coal imports, but also to achieve a greener environment. Pipeline infrastructure is also likely to be a focus area, with cross-country pipelines improving India’s strategic oil security. There is likely to be a further boost to city gas distribution projects and coverage may be expanded. But most importantly, industry concerns around certain regulatory aspects, if addressed, could reinvigorate interest in the sector.

 Incremental allocations for Water and sanitation infra

This sector will likely see incremental allocations in line with the already announced intent of the Government, with the laying of pipeline infrastructure accelerating as we move closer to elections.

 Balancing cash flow estimates in telecom sector

 Telecoms is another area where a lot of uncertainty has been removed with the recent Government incentives and concessions. While there isn’t much expected for the sector incrementally, it will be interesting to see how the Government balances its cash flow estimates from the sector, which are likely to be much lower now in the wake of the package announced.

 Concessions for aviation infrastructure

 The aviation sector has faced a lot of challenges due to the pandemic and it is likely that some sort of concession may be offered to players in the airport infrastructure business. However, given that the Government has very limited fiscal headroom, we can’t really expect too much. The only plausible way for the Government to do this is to open the sector to more FDI and encourage more investments.

 Lastly, given the huge investments already committed by the Government to the infrastructure space and the limited number of Engineering, Procurement and Construction (EPC) players who can deliver such large projects, we need an environment that not only provides capital support to developers through models like HAM but also something which enables EPC companies to execute projects with the limited capital resources at their disposal. There is a need for innovative models that can address this if we are to come anywhere close to the stated targets. We would be keen to see if the Finance Minister has anything to offer in this regard.

 The author, Ricky Kirpalani, is Lead Sponsor and Investment Advisor at First Water Capital.

  To  know more information visit:

Indian companies have mopped up more than Rs 9 lakh crore through equity and debt routes in 2021 to meet their renewed thirst for business expansion in a buoyant stock market brimming with liquidity and helped by recovering macroeconomic indicators after pandemic-ravaged first few months. Unless the still-evolving Omicron situation plays spoilsport, the next year is expected to be much more robust in terms of fund-raising activities and there seems to be no dearth of funds, experts said.

 ”The banks have been sitting on surplus liquidity for quite a while and there should be enough appetite for quality borrowers, said Ricky Kirpalani, Lead Sponsor, First Water Capital Fund. In the year passing by, fund mobilization through debt markets has fallen sharply, while the equity fundraising has been robust and the stock market bull-run with liquidity all-around has resulted in record fund-raising through initial public offerings (IPOs).

 Despite the plunge in fund mobilization through the debt route, it continued to contribute a lion’s share to the overall fund-raising activity in 2021. Debt fund-raising has slowed because of long-term economic disruptions during the first wave of the coronavirus pandemic, followed by a prolonged impact of the ravaging second wave, said Sandeep Bhardwaj, CEO, Retail, IIFL Securities.

 Out of the cumulative Rs 9.01 lakh crore garnered till mid-December this year, funds totaling Rs 5.53 lakh crore were mopped up from the debt market, Rs 2.1 lakh crore came from the equity market, Rs 30,840 crore through REITs and InvITs, and Rs 1.06 lakh crore via the overseas route, data compiled by analytics major Prime Database showed. In 2020, firms raised Rs 11 lakh crore, including Rs 7.91 lakh crore through debt and Rs 2.12 lakh crore through equity.

 Explaining higher fund-raising through debt route in 2020, Samir Sheth, Partner and Head – Deal Advisory Services, BDO India, said that businesses came to a halt as a strict lockdown was imposed since March 2020, and to manage the adverse impact of the same, corporates resorted to debts. He further said that the stock market was down for the most part of the year and PE/VC markets were also not that active, leaving businesses with few options other than debt funding in 2020.

 Fresh capital was raised by companies for debt payment, to fund capital expenditure for new projects, to support inorganic growth like acquisitions as also for marketing and R&D purposes, said Satyen Shah, MD & Head, Investment Banking at Edelweiss Financial. While companies wanted to have the liquidity to tide over uncertainties related to the pandemic during 2020, it has been largely related to economic growth in 2021 and businesses are raising funds primarily to expand, Sheth said.

 Of the total Rs 5.53 lakh crore raised through Indian debt markets in 2021, Rs 5.38 lakh crore came from the private placement and Rs 14,277 crore was through public issuance. ”Indian debt markets are mostly tapped by the financial sector companies who use funds for onward lending (as the economic cycle gathers pace) and boost capital buffers,” said Ajay Manglunia, Managing Director & Head – Institutional Fixed Income, JM Financial.

 The non-financial bunch deploys the funds majorly for general corporate expenses, capital expenditure, and capital for inorganic growth opportunities apart from refinancing existing debt, he added. In the equity market, funds mostly came from initial share sales as ample global liquidity, robust equity market and massive equity participation pushed the IPO market to new levels this year.

 Within the equity segment, the IPO route helped companies raise Rs 1.2 lakh crore, Qualified Institutional Placement (QIP) route added Rs 41,894 crore, rights issue of shares to existing shareholders accounted for Rs 27,771 crore, while Offer for Sale (OFS) through stock exchange mechanism contributed Rs 22,912 crore. A total of 63 IPOs mopped-up record Rs 1.2 lakh crore, and Small and Medium Enterprise (SME) IPOs brought in Rs 710 crore.

 In comparison, Rs 26,613 crore were raked in through 14 main-board IPOs, while Rs 159 crore came via the SME segment in 2020. Buoyant stock markets and spectacular listing gains by some companies were the main factors driving the IPO frenzy, said Piyush Nagda Head-Investment Product at Prabhudas Lilladher.

 IIFL Securities’ Bhardwaj believes that bullish trajectory will continue in 2022 also for the IPO market and the new year might see a new record level of funds raised while the mega initial share-sale of LIC is also in the pipeline. Apart from public issues, equity fund-raising through QIPs dropped to Rs 41,894 crore in 2021 from Rs 84,509 crore last year, primarily on account of availability of cheaper debt and expectation of high valuations due to rising markets making promoters hesitant to dilute.

 Another reason for the decline in QIPs fund-raising could be expectations of a further rise in stock markets as the markets were constantly rising from the beginning of the year till mid-November. The number of QIPs in 2021 has been higher than the last year, but the quantum has been relatively lower.

 Going forward, First Water Capital Fund’s Kriplani said that the fund collection through QIPs may pick up as the capex cycle is now reviving and valuations are rich. Funds mobilized through the rights issue mode also plunged to Rs 27,771 crore in 2021 from Rs 64,984 crore last year. Bharati Airtel contributed a major chunk with its Rs 21,000 crore rights issue this year.

 The year 2020 had seen the largest ever rights issue of Reliance to the tune of Rs 53,000 crore, making this year look pale in comparison. However, funds collected via the OFS route — used for dilution of promoters’ holdings — rose to Rs 22,912 crore this year, from Rs 20,901 crore in 2020.

 In addition, firms took infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) mode for raising funds and raked in Rs 32,125 crore in the year passing by, lower than Rs 38,109 crore mobilized in 2020. Apart from the domestic route, funds totaling Rs 1.06 lakh crore have been raised through overseas bond markets and foreign currency convertible bonds (FCCBs), much lower than close to Rs 68,000 crore collected last year.

 Going ahead, experts believe that a robust funding scenario for Indian firms will continue into 2022 for the equity as well as debt routes. ”Considering the strong liquidity, Covid situation being under control, positive corporate earnings outlook and overall India growth story. We expect investors to continue to look at funding Indian firms,” Shah of Edelweiss Financial Services said.

 According to BDO India’s Sheth, barring any large economic impact of Omicron, overall economic growth and significant funding scenario for Indian firms will continue into 2022. With regards to debt, IIFL Securities’ Bhardwaj believes significant fund-raising through debt is likely to happen in the next few quarters as the economy is back on track and private capex plans picking up.

 To know more information visit: