The total amount raised by companies through the qualified institutional placement (QIP) route has hit a record high in 2017, crossing Rs 49,000 crore, even as the stock markets have scaled new highs. A total of 33 companies took the QIP route in 2017 to raise Rs 49,702 crore, data sourced from Prime Database revealed. This includes some of the biggest issues in the past 11 years, with banks leading the way. State Bank of India’s (SBI) Rs 15,000 crore offer was the biggest in 2017 so far. SBI’s was biggest such equity issuance in the country, the lender had issued around 52.21 crore new shares at a price of Rs 287.25. SBI came with the offer to augment its capital adequacy ratio and for general corporate purposes. Kotak Mahindra Bank’s offer was the next biggest. The private lender raised Rs 5,803 crore in May 2017. Kotak’s offer was to enable its founder, Uday Kotak, to bring down his personal stake to the RBI mandated levels. Uday Kotak at present owns a 29.78% stake in the bank. Yes Bank which had to scrap its QIP in September 2016, successfully raised Rs 4,906 crore in March 2017. Federal Bank, DCB Bank and United Bank of India were the other banks which raised money through QIPs this year.
Hindalco, Brigade Enterprises, Delta Corp, Apollo Tyres, Edelweiss Financial Services and Premier Explosives were some of the other companies which raised money through QIPs. “It has been a phenomenal year for follow-on fundraising. Many large global fund managers and marquee pension funds have invested in QIP issues this year. Demand was strong from both foreign portfolio investors and domestic institutional investors. The companies which raised money are very large companies with a strong track record. Moreover, there is a strong fund flow especially from domestic retail investors, and mutual funds also participated in these issues in large numbers,” said V Jayasankar, Senior Executive Director and Head of Equity Capital Markets at Kotak Investment Banking.
Banks and financial services companies with offers of Rs 41,000 crore accounted for 83% of the total amount raised. Market participants said the need for Tier 1 capital and the necessity to meet Basel III requirements as the reasons for banks opting for QIPs. “If you take away financial services the amount drastically reduces. Ex-BFSI is still to see a good uptick in QIPs. In 2010 we saw 59 QIPs, you won’t see that many this year. The small-cap and mid-cap companies have still not come back,” said an investment banker requesting anonymity. “This is because of the capex cycle not being there yet. That is a big missing piece this time around. When the economy revives and people’s capacity utilisation increases, companies could start raising for fresh capex,” he added.
The highest amount raised through QIPs before this year was in 2009, when 53 companies raised Rs 34,676 crore. Market Participants expect robust fundraising through QIPs will continue. “If you look at the banking and NBFC space, these companies need to raise capital every 2-3 years to finance their growth. The banking and NBFC space will continue to raise money,” said Jayasankar. “The market environment is fairly robust and we believe the trend is likely to continue. While last year you saw a large amount of capital being raised by BFSI companies. We expect fairly robust capital raising from BFSI and non- BFSI companies in the coming year,” said Nipun Goel, President Head –
Investment Banking, IIFL
QIP is a capital-raising tool wherein a listed company can issue equity shares, fully and partly convertible debentures, or any security other than warrants that are convertible into equity shares. But unlike in an IPO or an FPO, only institutions or qualified institutional buyers (QIBs) can participate.