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. |
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| 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. |
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| QIP allows listed companies to raise funds through placement of shares to foreign and domestic institutions in India in a much quicker way. |
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| The shares were placed with Goldman Sachs, Voyager Fund, Nikko Asset Management and Sundaram Mutual Fund. |
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| 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. |
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| 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. |
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| "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. |
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| 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. |
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| "Liquidity of Indian papers in the domestic markets is much higher, compared with overseas exchanges for GDRs," he said. |
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| 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. |
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| The capital market watchdog pushed QIPs saying that GDRs/ FCCBs were resulting in a gradual export of the domestic markets while impacting their depth. |
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| 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. |
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| Enam Financial is also finalising QIPs for corporates, which are expected to hit the market soon. |
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| MATTER OF CHOICE |
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| QIP allows listed companies to raise funds through placement of shares to foreign and domestic institutions in India in a much quicker way |
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| ABOUT $500 mn likely to be raised by several firms through the route |
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| COMPANIES are now preferring QIPs to GDRs/ FCCBs, as the domestic markets have more depth for Indian equities than overseas exchanges |
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