QIPs all set to make a Rs 12,000-crore comeback as Bank of India, Canara Bank, others, eye big money

MUMBAI: Qualified institutional placements (QIPs) are resurgent after having gone into a steep decline in the first eight months of the year. Indian companies are expected to raise Rs 10,000-12,000 crore by selling shares to qualified institutional investors in the next few weeks, taking advantage of a liquiditydriven market rally to meet immediate spending needs or clean up stretched balance sheets.

Half-a-dozen companies have raised about Rs 3,000 crore in September, three times what was generated in the first eight months of the year.

Buyers keen on Indian stocks
Investment bankers have conducted at least two dozen overseas roadshows in North America, Europe, Middle East and Far East to test the appetite of bulgebracket institutions, sovereign funds and pension funds, said several people who were on these trips.



Nearly a dozen companies including Bank of India, Canara Bank, IndusInd Bank, IL&FS and Mahindra CIE are said to be planning to raise a total of as much as Rs 12,000 crore in the next one to three months based on estimates arrived at by ET after talking to the people cited above. Even Yes Bank is expected to raise money through this route after its recent $1-billion QIP floundered.

Potential buyers are keen on Indian stocks thanks to the sectoragnostic rally in the broader market, the investment bankers said. With the Sensex gaining nearly 8% so far this year and foreign institutional investors (FIIs) pumping Rs 45,500 crore into stocks, fund-raising prospects are turning positive and a sizeable chunk could come through the QIP route in the next few months, experts said.

“Companies are coming forward to raise funds through QIPs as there is ample liquidity in the market and valuations, according to promoters, are fair,” said Anup Bagchi, CEO, ICICI Securities. “You would see a number of companies mainly from banking and NBFCs (non-banking finance companies) raise funds through this quick and fast way of fundraising in coming months.”

The process involves a listed issuer issuing equity shares or non-convertible debt instruments along with warrants and convertible securities other than warrants to qualified institutional buyers. A QIP takes much less time than an initial public offering. Experts see an uptick in QIP issuances with enough liquidity in the markets and share prices being supportive.

The money thus raised will be used for working capital requirements and refinancing of debt, Bagchi said.

Steps to revive QIP activity
The Securities & Exchange Board of India ( Sebi) had actually met bankers last month to discuss steps to revive QIP activity with experts attributing the slump to volatile equity markets. But now that QIPs are roaring back, investment activity is set to pick up, they said.

The equity markets are a natural choice for those looking to fund capital expenditure and repay or refinance debt, said Vinay Menon, managing director, JPMorgan.

Earlier this month, Motherson Sumi raised about Rs 2,000 crore while Bharat Financials garnered Rs 750 crore through QIPs.

“While companies are timing the good market conditions, there is a strong appetite for genuinely and fundamentally strong companies in the QIP market,” said Gautam Trivedi, CEO, Religare Capital Markets, which advised Dhampur Sugar and Dwarkesh Sugar on raising about Rs 120 crore through QIPs earlier this month. A few more sugar companies are planning QIPs, he said.

In the January-August period, seven companies raised Rs 795 crore compared with 32 companies raising Rs 19,064.9 crore through the QIP route in all of 2015. The year before that saw 33 companies raising Rs 31,684.2 crore, according to Prime Database.