[T.S.R:11156] Shares at five year high.

Oct. 1 (Bloomberg) -- Indian companies tapped investors for the most funds since at least 2004 in the third quarter as they take advantage of the biggest stock market rally since 1991.

 

Companies including NHPC Ltd. and Oil India Ltd. raised 338 billion rupees ($7 billion) in the three months ended Sept. 30, according to data compiled by Bloomberg. Axis Bank Ltd. and Indiabulls Financial Services Ltd. led 162 billion rupees in sales to institutions, the highest ever.

 

"There is a lot of demand to fund the growth capital that India needs," said Aisha De Sequeira, managing director at Morgan Stanley's investment banking unit in Mumbai. "It's the emerging markets which are seeing the growth and as long as companies can show returns on the capital that is being raised, there will be demand."

 

Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year. Their expansion plans may help revive economic growth from its slowest pace in six years.

 

The Bombay Stock Exchange Sensitive Index has more than doubled in value from its low this year on March 9. Overseas funds have bought 575 billion rupees worth of the nation's stocks this year, more than reversing the record net sales of 530 billion rupees for the whole of 2008.

 

Kotak Mahindra was the top ranked arranger last quarter after advising on initial share sales of NHPC and Adani Power Ltd., while Enam Financial Consultants Pvt. came in second, Bloomberg data shows. Morgan Stanley was No. 3 after managing sales of Oil India and Indiabulls Financial Services.

 

NHPC, Oil India

 

NHPC, India's biggest hydroelectric power producer, raised 60.4 billion rupees in an initial offer in August, making it the first among state-run companies to list this year as the government aims to raise money from asset sales. Oil India, the second-biggest state-run energy explorer, raised 27.8 billion rupees in an initial sale in September.

 

"There is a hunger from investors for quality paper from companies who are looking to de-leverage or for growth capital," S. Ramesh, chief operating officer at Kotak Mahindra Capital Co., said in a phone interview in Mumbai. "The pipeline is getting stronger and we will see more fund raising by companies in real estate, infrastructure, power and banking."

 

Reliance Infratel Ltd., the tower unit of India's second- largest mobile-phone company, Godrej Properties Ltd., controlled by Indian billionaire Adi Godrej, and Indiabulls Power Ltd. are among companies planning initial share sales.

 

Public Works

 

Prime Minister Manmohan Singh, who won a second consecutive five-year term in May, has said the government will spend more on public works to boost the $1.2 trillion economy, which the central bank forecasts will expand at the slowest pace since 2003. The government estimates infrastructure spending at $500 billion in five years to 2012.

 

Share sales by the government in state-run companies may increase by 150 billion rupees in the fiscal year ending March as a revival in the nation's economic growth lures investors, S. Ramesh at Kotak said. India should aim to raise as much as 250 billion rupees a year from asset sales, the finance ministry said in a report on July 2.

 

Companies raised 228 billion rupees in 2008, the lowest amount in at least five years, according to Bloomberg data.

 

"Markets were starved of funds for over 18 months," S. Subramanian, head of investment banking at Enam Financial Consultants Pvt., said in a phone interview in Mumbai. "Now that an opportunity has presented itself, companies are taking advantage of it."

 

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net

Last Updated: September 30, 2009 22:01 EDT

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