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Fundraising through the issuance of shares to qualified institutional investors has seen hectic activity in the first half of the current fiscal year (FY24), with 20 companies mobilising over Rs 18,400 crore, more than four-fold from the year-ago period, on positive investors' sentiments.
Moreover, the robust trend of Qualified Institutional Placements (QIPs) in the first half of the fiscal year 2023-24 is expected to persist throughout the second half of the year too, Sanjay Moorjani, Research Analyst at SAMCO Securities, told PTI.
Prashant Rao, director and head of equity capital markets, Anand Rathi Investment Banking, said that market and investor sentiments play an important role for these issuances.
Till the time market sentiments are positive and investors are earning returns, listed companies would prefer to raise funds through QIP which allows them to have faster access to funds.
"We believe the second half of this year also to be positive for QIP issuances," he added.
According to prime database.com, 20 companies collected Rs 18,443 crore through QIPs in the first half of 2023-24, which was way higher than Rs 4,022 crore raised in the same period last year.
QIP issuance was dominated by financial services and power generation companies as they accounted for 70 per cent or Rs 12,890 crore of the overall amount.
The largest QIP was from state-owned Union Bank which mopped up Rs 5,000 crore, accounting for 27 per cent of the total QIP amount.
The bank raised the amount to augment its capital base.
In addition, there was one QIP of a REIT of Brookfield India Real Estate Trust that garnered Rs 2,305 crore during the period under review.
"The resurgence in fundraising activity through QIPs signifies a growing confidence among investors and businesses alike.
"As companies seek fresh capital, they are positioning themselves to seize new growth opportunities and expand their operations.
"This surge in the fundraising activity clearly shows that the private capex has started to revive," SAMCO Securities' Moorjani said.
Anand Rathi Investment Banking's Rao attributed the primary reason for the increase in QIP fundraising to the market and investor sentiments that play an important role in their success.
Unlike the first half of FY23, when market sentiments were relatively sluggish, the markets have done well and have remained positive through the first half of FY24.
Listed companies that need funds either to meet their capex/opex requirements or to comply with Sebi's 25 per cent minimum public shareholding norms generally opt to raise funds through the QIP route.
Further, as compared to rights issues or follow-on public offers (FPOs), the QIP route takes less time and fewer compliance norms.
QIP is one of the quickest products to raise funds from institutional investors.
It is designed only for the listed companies, which allows them to mobilize funds quickly from institutional investors without the need to submit any pre-issue filings to market regulators.