India Inc raises over $2bn through QIPs since April

MUMBAI: At a point of time when others traditional way of funds seems raising drying up, India Inc has raised over $2 billion or Rs 12,354 crore by way of qualified institutional placement (QIPs) during the first eight months of 2013 despite volatile market conditions. QIP is a capital raising tool where a listed firm can issue equity shares to institutional investors.
To put things in perspective, Rs 12,354 crore raised though QIP 20 issuances in first eight months is 38% more than total of Rs 8,969 crore raised through QIPs through 47 issuances last year. The BSE benchmark Sensex has lost 4.9% or 961.09 points to 18,619.72 during this period.
"As the market condition has been sluggish since June 2013 due to various domestic and international issues, the fund raising through QIPs has slowed down in the recent months. However, one may see improvement in QIP market in the coming months due to increased fund raising from banks through this route. As of now government is expected to encourage PSU banks to take the QIP route to raise additional capital. In this connection, government may allow State Bank of India to raise around Rs 8,000 crore of equity capital either through a QIP or FPO," said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities Limited in a research note.
Some of the key issuances during 2013 include that of Axis Bank with the QIP size of Rs 5,537 crores. QIPs introduced in 2006 were aimed at reducing India's over-reliance of foreign capital. It reduced the complexity associated with raising domestic capital from a select group of qualified institutional buyers (QIB), which was a pool of institutional investors such as banks that were deemed to possess the capital and ability to make rational investment decisions.
The finance ministry is also likely to allow four other state-run banks, including Syndicate Bank , United Bank of India , and Union Bank of India , to raise capital through the QIP route. The fund raising by the banks is part of the government's programme to capitalize state run banks. Actually, the budget has a provision of Rs 14,000 crore towards this end.
All in all, QIP as a fund raising instrument has made very significant inroads in the Indian corporate sector since its launch of 2006. The capital market conditions during 2006 to 2013 have made the fund raising through QIP quite volatile.
"The sheer ease and convenience of the fund raising mode through QIP will pave the way for more robust action in this space once the market conditions and confidence return," Thunuguntla added.