Financial Daily from THE HINDU group of publications
Sunday, Dec 25, 2005
Financial Daily from THE HINDU group of publications Sunday, Dec 25, 2005 |
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Investment World
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Insight Markets - Investor Protection Corporate - Overseas Borrowings Bond with caution Vidya Bala
DOMESTIC investors should take a cautious view of overseas offerings, as there are several aspects to them that could hurt their interests. Aggressive pricing of an offer just to make the most of the ongoing bull market and not linked to business needs may boost short-term performance. But in the long run the expanded equity tends to pull the per share earnings with disastrous implications for the share price performance. If overseas investors become disenchanted with such issuers, shareholders could get hurt. This happened in the mid-1990s when several Indian companies went overboard taking advantage of foreign institutional investors, new to the Indian markets. Once they got a hang of what the companies were up to, retribution was swift . and stock prices went into prolonged bear phase. But the new regulations on pricing norms for overseas offers may make it more difficult for mid-cap companies with highly volatile price movements to raise money overseas, especially in a declining market. Placing the securities at a premium to the local market price may pose a challenge. If this happens, then access to capital from international markets may well be restricted by market forces.
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