India Inc plans fundraising via QIPs as Lok Sabha election nears end

Optimism around poll outcome, capex seen, attractive valuations seen as triggers

As the marathon general elections draw to a close, India Inc is firming up strategies to raise fresh capital. The optimism surrounding the election outcome, capital expenditure (capex), and favourable valuations are key drivers behind listed firms’ plans to issue new papers.

Adani Enterprises, the flagship firm of the Adani group, on Wednesday had received board approval to raise Rs 16,000 crore in equity capital. A day earlier, power transmission company Adani Energy Solutions announced its plan to raise Rs 12,500 crore.

In addition, drug major Torrent Pharma, solar power generation firm KPI Green, and Cello World — which operates in the consumer ware, writing instrument and moulded furniture segments — are targeting fund raises between Rs 750 crore and Rs 5,000 crore.

The preferred method for these companies to raise equity funds is through qualified institutional placements (QIPs), where a company can allot new shares to a group of investors at a price close to their current market rate. 

Power company JSW Energy, IT services firm Coforge, and broker Angel One have already successfully concluded their large-scale QIPs in the past month. Most of these companies will use the proceeds to expand their operations and venture into new business areas.

Investment bankers indicate that more companies are seeking board approvals to raise fresh capital to capitalise on the buoyant market conditions. In the past, companies usually refrained from launching any share sales ahead of the Lok Sabha elections. However, optimism around the election outcome has led to a departure from this trend.

“Generally, market participants are positive about the market outlook. The QIP issuance is expected to be buoyant, thanks to the continuity in policy and supportive markets,” said Chirag Negandhi, managing director, JM Financial. QIPs are getting bunched up now as companies were waiting for the post-result cool off period to end, he added.

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According to Sebi rules, companies are not allowed to conduct investor meetings ahead of the declaration of their quarterly financial statements. With the March 2024 and financial year 2023-24 result season ending, companies have a few weeks’ window to launch share sales, said industry players.

Despite some losses, most stocks are trading around record levels despite election-related volatility. High market valuations help companies raise capital with lower dilution, and they find enough takers for their shares. "QIP is a bull market product… QIPs are also extremely time-efficient and relatively inexpensive, making it the preferred mode of raising follow-on fresh capital,” said Pranav Haldea, managing director of PRIME Database, a leading provider of data on the capital market.

Over the past six months, listed firms have raised an average Rs 9,000 crore a month via QIPs.

"Companies are preparing a war chest and raising capital to cash in on the larger opportunities that arise after elections, whether in terms of higher capital expenditure requirements, working capital or inorganic growth. There is a lot of liquidity in the market thanks to the rise in mutual fund systematic investment plans (SIPs) and higher demand for quality Indian stocks. I expect this trend to continue in terms of more such offerings. We will have more new age businesses, core sector companies launching QIPs going ahead,” said Mahavir Lunawat, founder and managing director, Pantomath Financial Services.