Over ₹36,300 worth of QIPs waiting to be raised in 2023

The amount raised by Indian companies through Qualified Institutional Placement (QIP) The route in 2023 is likely to exceed what was raised in 2022 with over Rs 36,300 waiting to be raised.

In 2023 so far, companies have raised Rs 5,800 crore – from January to June – through QIPs, while more than Rs 11,700 crore were raised last year, according to data provided by Prime Database. In the first six months of 2022, just over Rs 5,000 crore has been collected through this route.

Of the Rs 36,300 crores still to be raised, for which the companies have received board approval and in some cases, shareholder approval too, Rs 33,300 crore is accounted for by Adani Group Which raises money to finance its expansion plans as well as to reduce its debt.

The total amount to be raised does not include the planned QIP issuance by Hindustan Copper, which plans to issue 9.7 crore shares, which, at current prices, will amount to ₹1,161 crore. Other companies planning QIP issues are Spice Jet And City Union Bank.

QIPs are an easier source of funding for companies than the general issue, as the process is faster and subject to fewer rules and regulations. Since the subscribers are institutions, there are no strict disclosure rules, as the companies had already communicated with investors in roadshows prior to the release.

An interesting feature of the QIPs subscription data shows that mutual funds were the top subscribers to such papers, followed by insurance companies and banks.

QIPs are generally allocated at a discount to the prevailing market rate, which is an incentive for organizations to buy in bulk. For example, Aditya Birla Capital’s ₹1,750 crore QIP was executed at ₹175, a discount of 3.4 per cent on the price on opening the QIP and an 11 per cent discount on the price on the day the shares were allotted. U Gro Capital’s QIP also took a 4.7 percent discount to the prevailing market rate.

While the rally in Indian stock markets with indices touching life highs has prompted many private equity funds to exit or sell large portions of their holdings, mutual funds in India have seen this as an opportune moment to take advantage of the situation. They were buyers in both group and block deals, while also subscribing to new paper issued by the companies.

Kotak Institutional Equity data showed that in the June quarter of fiscal year 24, private equity funds sold more than $3.4 billion worth of Indian stocks, which was higher than in the previous quarter. In the same period, local institutions were net sellers of Indian shares at ₹4,532.6 crore in April, but were net buyers in May and June at more than ₹8,100 crore. In 2023 so far, local institutions were net buyers in Indian stocks to the tune of ₹58,553 crore.