Mumbai Fund raising by India Inc through the Qualified Institutional Placement (QIP) route declined by 82 per cent in 2022, as global macro headwinds and stock market volatility reduced opportunities for companies to tap the market to raise equity. Gave.
QIP is a capital raising instrument through which listed companies can sell shares, fully and partially convertible debentures, or securities other than warrants which are convertible into stocks, to institutional investors.
As of July, only seven companies had used QIP to mobilize 5,039.49 crore, as compared to 26 companies raised in the same period last year 28,177.09 crore, data from the primary market tracker Prime Database revealed.
“QIP is a bull market product and thus, in volatile markets, or markets that are trending downwards, some companies will use this route to raise funds. And that is why the volume of fundraising through QIP has been low this year,” said a Mumbai-based investment banker on the condition of anonymity.
To be sure, since hitting its 2022 low of 51,360 on June 17, the benchmark Sensex has seen a 17% recovery, with foreign institutional investors (FIIs) making a comeback in the Indian stock markets. This has raised hopes that companies waiting on the edge may reevaluate their plans and launch QIPs.
On 3 August, AU Small Finance Bank Ltd was the first bank to launch QIP since May. “We are seeing more interest in QIP over the past few weeks. We have recently completed the AU Small Finance Bank QIP which has increased 2,000 crores. With more stability in the markets, easing global oil prices and more optimism that there may not be a prolonged economic slowdown in the US, we continue to see more discussion on potential fundraising by corporates,” said Prashant Gupta, Partner , National Practice Head, Capital Markets at law firm Shardul Amarchand Mangaldas & Co.
The markets have recently seen some major secondary deals involving KKR-Max Healthcare, Aberdeen-HDFC Life, Uber-Zomato and Temasek-Crompton.
According to Gupta, given the documentation and due diligence process required under Securities and Exchange Board of India regulations, such secondary deals are always a harbinger of a rebound in primary deals, which take a little longer to execute, “We Seeing interest in QIP. Currently from companies in the financial services and manufacturing or industrial sectors. These companies have posted decent earnings and growth over the past few quarters, and we expect them to be the first to reach the primary markets in the coming months.”
The stock market closed higher on Wednesday as investors pinned their hopes on strong earnings data amid signs of cool inflation, sending the Sensex above the 60,000-level for the first time since April 5.
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