 "QIPs spring back as stocks rally")
The sharp rally in stock prices since February has re-infused life in the Qualified Institutional Placement (QIP) market.
Last month, six companies raised close to Rs 3,700 crore in all through QIP, highest since September 2015. The earlier occasion when more than six QIPs were launched in a single month was in October 2010.
Experts say more companies are preparing to issue new equity through the QIP route, to benefit from the rise in valuations and availability of liquidity.
“There is fair interest in the markets for QIPs of late ,as has been evidenced in response to some of the recent deals. The overall scenario in the capital markets is positive. All the recent IPOs (initial public offerings of equity) have seen strong demand,” said Nipun Goel, president, investment banking, IIFL Holdings.
The companies that did QIPs last month were Motherson Sumi Systems, Bharat Financial Inclusion, Manpasand Beverages, Satin Creditcare Network, Fiem Industries and Dwarikesh Sugar. The general plan is to utilise the capital raised for expansion, refinancing of debt and working capital requirements.
If not for YES Bank’s failed QIP, mobilisation through this route would have crossed Rs 10,000 crore. The private lender said it had to defer its QIP due to misinterpretation of guidelines, amid a sharp fall in its stock price.
QIP is considered a quick and convenient way of fund raising for listed companies. The issuance is typically done to a small set of institutional investors, at a slight discount to the market rate.
“In the past few years, there has been a slowdown on the QIP front, due to weakness in equity markets and other concerns, including muted corporate earnings. Now that the markets are doing well, we have started to see more companies coming up with QIPs,” said B Madhu Prasad, chairman, Keynote Corporate Services.
The benchmark BSE Sensex has risen 23 per cent since the Union Budget presentation on February 29. Several of the broader market gauges, such as the BSE Midcap index, have rallied even more. The increase in stock prices bodes well for equity issuances, including QIP. Experts say the rally has created an opportunity for a lot of listed companies to tap the capital markets.
“The pipeline for QIPs also looks good, as a lot of companies, especially in steel and power, in which revival is under progress, will need capital,” said Prasad.
“Companies with good fundamentals can tap the QIP market,” adds Goel.
Between January and August, less than Rs 800 crore was raised through the QIP route, in only seven issuances. Experts say sharp volatility at the start of the year was the reason. In calendar year 2015, a total of 32 companies had raised Rs 19,065 crore via QIP.
