The amount raised by Indian corporates through the qualified institutional placement (QIP) route in 2023 is likely to surpass what was raised in 2022 with over ₹36,300 crore still waiting to be raised.
In 2023 year to date, companies have raised ₹5,800 crore - from January to June - through QIPs, while over ₹11,700 crore was raised last year, according to data provided by Prime Database. In the first six months of 2022, a little over ₹5000 crore was raised through this route.
Of the ₹36,300 crore still to be raised, for which companies have received board approval and in some cases, shareholder approval as well, ₹33,300 crore is accounted for by the Adani Group which is raising money to fund its expansion plans as well as to reduce its debt.
The total amount to be raised does not include the QIP issue planned by Hindustan Copper, which is planning to issue 9.7 crore shares, which, at current prices, would amount to ₹1161 crore. Other companies that are planning QIP issues are SpiceJet and City Union Bank.
QIPs are an easier source of financing for companies compared to a public issue, as the process is faster and subject to fewer rules and regulations. Since the subscribers are institutions, there are no stringent disclosure norms, as companies would have already reached out to investors at roadshows prior to the issue.
An interesting feature of the subscription data of QIPs shows that mutual funds have been big subscribers to such papers, followed by insurance companies and banks.
QIPs are generally allotted at a discount to the prevailing market price, an incentive for institutions to buy in bulk. For instance, Aditya Birla Capital’s ₹1,750 crore QIP was done at a price of ₹175, a 3.4 per cent discount to the price when the QIP opened and an 11 per cent discount to the price on the day when the shares were allotted. U Gro Capital’s QIP was also at a 4.7 per cent discount to the prevailing market price.
While the rally in the Indian stock markets with indices touching life highs has prompted many private equity funds to exit or sell large chunks of their holdings, mutual funds in India have seen this as a favorable moment to capitalise on the situation. They have been buyers both in block and bulk deals, while also subscribing to fresh paper issued by companies.
In the June quarter of FY24, private equity funds sold over $3.4 billion worth of Indian shares, which is higher than in previous quarters, data by Kotak Institutional Equities showed. In the same period, domestic institutions were net sellers of Indian equities at ₹4,532.6 crore in April but were net buyers in the months of May and June at over ₹8100 crore. In 2023 so far domestic institutions have been net buyers in Indian shares to the tune of ₹58,553 crore.