Fund-raising via QIPs nears record high

So far this year, 20 firms have raised Rs 28,078 cr through this route, the highest since 2009

An improvement in macroeconomic indicators through the past few months and a rally in equity markets have helped restore some of India Inc’s confidence, with companies looking to raise funds for capital expenditure, as well as other activities. So far this year, 20 companies have together raised Rs 28,078 crore through QIPs (qualified institutional placements), the most since 2009, when 53 companies raised a record Rs 34,676 crore through this route. In 2010, 59 firms mobilised Rs 26,147 crore, according to PRIME Database.

Between 2011 and 2013, 31 companies had collectively mobilised Rs 16,240 crore through this route; the companies opting for this route was low due to volatile market conditions. During this period, the benchmark Sensex had gained 3.2 per cent.

“An improved market sentiment and buoyancy have enabled stressed companies to raise money through the QIP route. India Inc has been in need of capital and a turnaround in the overall sentiment has helped them raise funds. I think this trend will continue because the current round of fund raising has been by stressed companies that face pressure on their balance sheet, besides a few others. The next round will be growth-related capital — money will be raised for capacity expansion and growth,” said Vaibhav Sanghavi, director (equities) at Ambit Investment Advisors.

Election boost
Following the outcome of the general elections this year, which saw the markets strengthen further, there has been a sudden spurt in the number of companies looking to raise funds. Since then, 17 companies have together raised about Rs 20,000 crore. During this period, the Sensex has rallied about 20 per cent (it stood at 22,417 on April 30).

In the past two weeks, four companies — IDFC, Info Edge, ITD Cementation India and Gammon Infrastructure Projects — have collectively raised Rs 2,153 crore through QIPs. The boards of directors of Dynamatic Technologies and Sadbhav Engineering have approved fund raising through this route. “The business community has seen a sharp increase in confidence and we expect this to result in strong domestic economic growth, leading to increased earnings. In expectation, stocks have seen a huge out-performance; we feel some have already priced ahead of the fundamentals,” said R Sreesankar, head of institutional equities, Prabhudas Lilladher.

Larsen and Toubro, Adani Enterprises, Apollo Tyres and JSW Energy are among the 20 companies looking to collectively raise about Rs 45,000 crore through this route; these have already sought/secured shareholder approval for the move. At its 27th annual general meeting at the end of this month, Sun Pharmaceutical plans to secure shareholder approval to raise Rs 12,000 crore through a QIP.

In the banking segment, Canara Bank, Syndicate Bank, Union Bank of India, United Bank of India and IDBI Bank plan to raise funds through the QIP route. “Usually, banks raise QIP money through a period of time; one of the reasons is to ensure they maintain the capital adequacy ratio, besides growth capital,” says Sanghavi of Ambit.