Funds raised from institutional buyers touch 33-month high

Hindalco, YES Bank, Minda Industries and United Bank of India raised Rs 8,684 crore during March

Monthly fundraising through qualified institutional placements (QIPs) hit 33-month high in March, as companies acted to grab the opportunity in a rising market.

In March, Hindalco Industries (Rs 3,350 crore), Yes Bank (Rs 4,907 crore), Minda Industries (Rs 300 crore) and United Bank of India (Rs 127 crore) collectively raised Rs 8,684 crore via QIP, highest figure in 33 months.

Earlier in June 2014, five companies had raised Rs 9,625 crore through QIPs, according to Prime Database.

"QIPs have mostly been raised by mid-cap and small-cap companies that have done well in stock performance over the past two years. Given the market rally, a number of companies believed it was a good time to raise funds, especially for expansion and restructuring," explains Dhananjay Sinha, head of institutional research at Emkay Global Financial Services.

The boards of directors at Reliance Infrastructure (R-Infra), Apollo Tyres, and Delta Corp have also approved raising funds by QIP, hoping to raise a total of Rs 4,250 crore via this route. R-Infra, part of the Anil Ambani group, alone plans to raise up to Rs 2,000 crore. It says the money would be used for business opportunities in defence sector, for reduction of debt and for general corporate purposes.

Going forward, a lot will depend on overall sentiment in stock market for corporate groups to raise money via QIPs, analysts say. Buoyant sentiment will augur well in the longer run.

"I think raising money via QIP will continue. There is a good amount of investor interest as well. I think mid-cap companies will continue to take this route," says Sinha of Emkay.

During financial year 2016-17, a total of 22 companies had raised Rs 13,671 crore through QIPs, as compared to 20 companies having mobilised Rs 14,358 crore in FY16. In FY10, as many as 67 entities had raised a collective Rs 39,768 crore through the route. "There is ample liquidity in the markets and institutions, too, are looking to looking to invest in good companies. Besides buying in the stock market, they are eyeing private placement to pick stake in sound companies," says A K Prabhakar, head of research at IDBI Capital.

On Yes Bank, analysts say the money raised via the recent QIP will spur growth. "With new capital, Yes Bank has refuelled itself for the next leg. Given the stable asset quality and some cost gains, we expect it to deliver strong earnings growth of 29 per cent over FY17-19. While the overall credit demand environment remains weak, Yes Bank is confident of both corporate growth and a ramp-up in retail (from individuals). Our revised target price for the stock (meaning, how far it would rise) is Rs 1,800. We maintain a 'buy' rating on it," says Abhishek Sahoo, an analyst with Citigroup.