With election uncertainties behind them, Indian corporates are going the whole hog with their fundraising plans through qualified institutional placements (QIPs) to meet their expansion plans.
In less than two months, Indian firms have secured board approvals to raise over Rs 60,000 crore through primary issues via QIPs.
Late last month, two Adani Group companies, Adani Enterprises and Adani Energy Solutions, received board approvals to raise a total of Rs 30,000 crore in equity capital through QIPs. Earlier this month, public sector lender Union Bank of India also obtained board approval to raise Rs 10,000 crore, including via QIPs, while JSW Energy’s board approved a similar fundraising amount last month.
According to Satyen Shah, President & Head of Nuvama Investment Banking, the political stability following the general elections has provided companies with a clear roadmap to execute their capital expenditure plans, which require growth capital. “These factors are driving more companies to seek equity fundraising through QIPs.”
He further added that fundraising through QIPs is a faster and less intensive process compared to other methods, making it the preferred route for companies seeking to raise growth capital.
QIP is a tool used by listed companies to raise capital by issuing equity shares or convertible debentures to qualified institutional buyers such as mutual funds, family offices, or foreign institutional investors (FIIs).
According to Prime Database, fundraising through QIPs jumped eightfold year-on-year to Rs 71,306 crore in FY24 from Rs 9,019 crore in FY23.
“We have already seen 35 companies raising more than Rs 32,000 crore in this calendar year through QIP as against 10 companies raising Rs 4,000 crore in the same period last year,” said Chirag Negandhi, MD, JM Financial.
He also added that with elections out of the way, many companies are looking to raise funds and tap the primary market in the second half of the year. “We expect fund raise through QIP to be the largest ever in this financial year,” Negandhi added.
Sunil Damania, Chief Investment Officer of MojoPMS, said with capacity utilisation exceeding 75%, Indian corporates are compelled to expand their capacity to meet future demand and QIP is one of the fastest ways to raise capital for expansion.
Experts also said companies are looking to take advantage of the bullish market sentiment driven by the surplus liquidity from domestic institutional investors like mutual funds and the return of the foreign portfolio investors (FPIs) to the Indian market.
“With monthly SIP touching Rs 21,000 crore, domestic mutual funds are looking for an opportunity to invest. FPIs, who were net sellers in April and May, have also turned net buyers investing $2 billion (Rs 16,600 crore) in the last two weeks,” said Negandhi.
Nuvama’s Shah also attributes the increasing number of board approvals for QIPs to annual general meetings (AGMs), which typically coincide with the June quarter.
“Shareholder approvals obtained during AGMs are typically valid for a year. This means if a company secures approval during an AGM, they have the flexibility to raise funds at any point over the next twelve months,” he added.
