Banks lead QIP revival in 2023: Listed cos raised Rs 53,070 cr so far
Fundraising through qualified institutional placement (QIP) was revived in 2023 after a lacklustre 2022, mainly due to fundraising by commercial banks. According to data compiled by Prime Database, Indian companies raised Rs 53,070 crore in 2023, of which six banks raised Rs 21,290 crore or 40 per cent.
If other financial institutions are included, the number increases to Rs 26,690 crore. The funds raised by banks through QIPs this year were surpassed earlier in 2020 and 2017.
After cleaning up their balance sheets in the last few years, banks are reporting healthy growth with a rise in net profit and improvement in asset quality, which has attracted investors’ attention.
“Banks have stabilised over the last two or three years, especially the public sector banks. They have cleaned their balance sheets, are attractively valued, and are a large part of the index. There is growth in assets, and lending is increasing, which requires banks to raise Tier 1 capital. With the availability of funds, which is there at the right price, they are going ahead and raising funds,” said Pranjal Srivastava, Partner-Investment Banking at Centrum Capital.
The interest rate scenario has also stabilised this year as the Reserve Bank of India kept the policy repo rate unchanged since February. Between May 2022 and February 2023, the repo rate was raised by 250 basis points to 6.5 per cent.
“Last year, we had a rising interest scenario, and there was net interest margin (NIM) compression. When NIM compression happens, stocks do not move, and it is hard to raise capital. This year, since March, interest rates have not gone up, so all the bank and non-banking financial company (NBFC) stocks have revived, and it has become easier to raise capital. And in a growing economy, banking, financial services and insurance (BFSI) will need capital continuously,” said Ajay Garg, managing director of Equirus.
The Bank Nifty gained 11.4 % in 2023 compared to 18.5% in Nifty.
“When the economy is doing well, the credit cycle will move up. And banks will be required to raise capital because of the credit growth we are witnessing now. Companies are putting large capital expenditure, especially manufacturers. So, we will see more QIPs happening from manufacturing companies and financials,” said Dharmesh Mehta, managing director and chief executive officer of DAM Capital.
The good run of QIPs is also expected to spill into the next year, particularly in the run-up to the general elections in April-May next year.
Investment bankers estimate $5 billion to $7 billion of QIPs next year, and banks and financial institutions are likely to constitute 70 per cent of the fundraising.
“QIP is the fastest mode of fundraising for a listed entity. More are expected in the next year. The outlook is positive, and the upbeat investor sentiment is expected to continue. The pre-election rally is likely to happen. Banks will dominate the QIP pipeline next year because of the nature of their business. Capital is the raw material for banks. They need to raise capital after a gap and whenever there is growth in balance sheets,” said Pranjal Srivastava, Partner-Investment Banking at Centrum Capital.
First Published: Dec 19 2023 | 7:17 PM IST