Fundraising via the qualified institutional placement (QIP) route gained momentum in calendar year 2019 (CY19). Given the revival in the equity market, a total of nine companies raised Rs 30,812 crore via the private placement route. This is 86 per cent higher compared to the previous year, and the second-highest amount raised via this route in the past five years.
Over the past two months, four companies have garnered a cumulative Rs 22,400 crore via this route. In CY18, 25 firms had raised Rs 16,587 crore, while in CY17, as many as 43 firms had raised Rs 60,652 crore, according to PRIME Database.
is a capital-raising tool through which listed companies can sell shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into stocks, to a qualified institutional buyer.
Sectorally, companies from the financial sector have shown an appetite for funds so far in CY19.
Recently, Bajaj Finance, the non-banking financial company, raised Rs 8,500 crore by issuing shares on a private placement basis to qualified institutional investors.
In September, private sector lender Axis Bank
raised Rs 12,500 crore in India’s second-largest QIP.
These entities plan to use the proceeds to augment long-term resources for meeting funding requirements for business activities and to meet the capital adequacy norms laid down by the Reserve Bank of India (RBI).
They also plan to use proceeds for repayment of debt and fund growth of existing businesses.
Sources: PRIME Database, BSE
“If one leaves out Axis Bank
and Bajaj Finance, the overall mop-up hasn’t been much. That said, the success story of these two shows the conviction of participants in the market and fundamentally sound companies, despite the news
flow,” says G Chokkalingam, founder and managing director of Equinomics Research.
According to PRIME Database, 70 companies had announced their intention to raise a combined Rs 1.5 trillion through the QIP
route in CY19, including State Bank of India, ICICI Bank, Adani Power, JSW Steel, and Indian Bank.
Munish Aggarwal, director (capital markets), Equirus Capital, shares a similar view and says Axis Bank
and Bajaj Finance
have contributed to nearly two-thirds of the funds raised.
He, however, sees more such issues if the economic downturn is arrested.
“We expect a gradual pick-up in issue activity, which will be driven by improving market sentiment and expected improvement in macroeconomic data. If the demand slowdown is addressed, CY20 will witness unprecedented issue activity,” says Aggarwal.
After September 2019, market sentiment revived sharply, driven by various policy initiatives by the government as well as the RBI to arrest the growth slowdown. This will, however, take time to work on the ground and reflect in the numbers, say analysts.
The Sensex has rallied 12 per cent, or 4,232 points, from its September 19 low of 36,093 levels — hitting an all-time high of 40,749 on Friday’s intra-day trade.
Analysts at Motilal Oswal Securities expect the government to maintain its policy/reform momentum and announce more initiatives, which could drive markets
“We expect financial services to contribute a lion’s share of incremental fundraising, but foresee improved participation from sectors like metals, consumer, logistics, health care, and capital goods,” says Aggarwal.