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Raising capital through the qualified institutional placement (QIP) route has been a hit with four of the issues mopping up nearly 30% more than the amount raised last year.
Four companies this year have managed to raise Rs 11,455 crore as opposed to the Rs 8,075 crore raised by 10 companies in 2013. In fact, the amount raised is the highest since 2010.
Returning investor confidence in the equity markets has been brining some of the large corporates back to the fund-raising table.
The country’s largest lender, State Bank of India, earlier this year, came out with its QIP issue raising nearly Rs 8,032 crore. In the last three months, Yes Bank, Idea Cellular and KSK Energy have also come out with their QIP issuances.
Since the 2008 equity-market meltdown, companies have been struggling with ballooning balance sheet deficits with not many avenues for raising capital. High interest rates and poor equity market returns made capital-raising unfeasible for these companies.
“Most of the companies that are looking to raise funds at this point are capital-intensive companies. So we will see a lot of large-cap names in the banking, power, infra and capital goods sector which are struggling for funds hit the capital market,” said Ajay Saraf, executive director, ICICI Securities.
However, over a period of two years, companies across sectors could be seen tapping the capital markets, said industry officials.
According to industry estimates, the total funds raised this year could be around Rs 30,000 – 40,000 crore, nearly 4-5 times the amount raised last year. But bankers are confident that sustained foreign institutional investor (FII) interest would see these issues through.
“The environment for fund-raising is very conducive as FII faith in the market has come back into the market. There is enough money and good appetite among these investors and they would want to participate in the fund-raising,” said V Jaysankar, senior executive director and head (equity capital markets), Kotak Investment Banking.
Some of the public sector banks that had postponed their QIP issue in February due to volatile market conditions are set to test the waters once again with sentiments improving.
Today, state-run lender IDBI Bank has informed the exchanges that the bank is planning for a QIP or a public offer to raise Rs 4,000 crore. Apart from requiring capital to fund business growth, public sector banks that are reeling under asset quality pressure, will need capital to absorb loan losses by making provisions.
| Returning investor interest: Funds raised through QIPs on the rise | ||
| Year | No. issues | Amount raised (Rs. Crore) |
| 2011 | 9 | 3459 |
| 2012 | 12 | 4,705 |
| 2013 | 10 | 8,075 |
| 2014 (till May) | 4 | 11,455 |
| Source: PRIME Database | ||
| Compiled by BS Research Bureau | ||
