On their way to growth, small- and mid-sized Indian companies are finding the qualified institutional placements (QIPs) route more favourable for raising funds.
Ever since the Securities and Exchange Board of India (Sebi) last year allowed companies to raise funds through the QIPs route to prevent the flight of domestic capital, the amount of funds raised through QIPs has been going up steadily. According to data collated by Prime Database, in this calendar year (CY 2007) there has already been a total of 18 QIPs raising a total of Rs 9, 235.54 crore. This is an increase of around Rs 5,300 crore or a whopping 135%. Last year in CY 2006, a total of 16 QIPs had raised Rs 3,935.45 crore.
Market experts feel that over a period of time, the QIPs route will gain more popularity among the mid- and small-sized companies as this route is far more cheaper than raising money through the Global Depository Receipts (GDRs) or the foreign currency convertibility bonds (FCCBs) route.
Prithvi Haldea, MD, Prime Database, said, “QIPs are a more efficient and faster way of raising capital, both domestically and overseas. QIPs are more cost efficient. The time to get the clearance for a QIP is faster as it does not have stringent disclosure norms. Moreover, what is aiding to the popularity of QIPs among the small and mid sized companies is the fact that QIPs do not have a lock-in period like other fund raising instruments like preferential allotments.”
Another market expert said that the reason why QIPs are gaining in popularity is the fact that they do not take place in the public domain. Most of the investors are institutional. “As a result of this, the small retail investors do not participate in this and the stigma of failure is eased off,” he said.
This calendar year (CY07), in the month of January and February, there have been 4 issuances, raising Rs 492.85 crore and Rs 506.73 crore respectively. May 2007 saw a single QIP raising Rs 1,221 crore. July 2007 witnessed 4 QIP issuances raising a total of Rs 4, 924.43 crore ? which happens to be the highest in a single month since Sebi showed the green flag for QIPs to raise funds.