QIPs gain ground

Spentex Industries raises Rs 46.6 cr through the route.

The Securities and Exchange Board of India's (Sebi) move to discourage corporate India from raising funds through overseas share issuances by creating a parallel market in the country has started paying off.

Spentex Industries, a Delhi-based textiles firm, on Monday raised Rs 46.6 crore through qualified institutional placements (QIP). The regulator had introduced the new instrument in May.

QIP allows listed companies to raise funds through placement of shares to foreign and domestic institutions in India in a much quicker way.

The shares were placed with Goldman Sachs, Voyager Fund, Nikko Asset Management and Sundaram Mutual Fund.

Investment bankers said several companies were in advanced stages of finalising their respective QIPs and it was estimated that anything between $400 million and $500 million was likely to be raised through the route in three to four months.

Companies used to prefer global depository receipts (GDR) and foreign currency convertible bonds (FCCB) mainly because of time and cost effectiveness. India Inc raised over $2 billion overseas in the calendar year 2005.

"QIP rules are straight forward and simple to execute. It has all the features of GDR issues," said S Ramesh, executive director of equity products group, Kotak Mahindra Capital.

Srinivasan Subramanian, head of investment banking, Enam Financial, said companies were now preferring QIPs to GDRs/ FCCBs, as the domestic markets had more depth for Indian equities than overseas exchanges.

"Liquidity of Indian papers in the domestic markets is much higher, compared with overseas exchanges for GDRs," he said.

Companies could save on the listing procedures on overseas exchanges such as Luxembourg, London or Singapore (the preferred bourses for GDRs/ FCCBs) through QIPs, Ramesh said.

The capital market watchdog pushed QIPs saying that GDRs/ FCCBs were resulting in a gradual export of the domestic markets while impacting their depth.

Kotak is currently in discussions with a few companies for QIPs and the total size of these issues could be in the range of $200-225 million.

Enam Financial is also finalising QIPs for corporates, which are expected to hit the market soon.

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MATTER OF CHOICE

QIP allows listed companies to raise funds through placement of shares to foreign and domestic institutions in India in a much quicker way

ABOUT $500 mn likely to be raised by several firms through the route

COMPANIES are now preferring QIPs to GDRs/ FCCBs, as the domestic markets have more depth for Indian equities than overseas exchanges