ManagementQIPs back in vogue with Rs 10k cr plans
With stock market sentiments bullish and investors back from their holidays, Qualified Institutional Placement (QIP) is also back in vogue. India Inc plans to raise more than Rs 10,000 crore through QIP in the next few months.
- Nasdaq Composite down 3%; Wipro slumps 5% - After a robust 2009, India Inc start "10 with Rs 5,800 cr QIPs - Gammon Infra for stakes in airport projects abroad - Two power plants proposed near Kanpur - Pulling all stops - Yes Bank plans to raise $150-200 mn via QIP
This comes along with Rs 25,000 crore being raised by the government through disinvestment in public sectors like NTPC and NMDC.
QIP is a capital raising tool, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants that are convertible to equity shares to a Qualified Institutional Buyer (QIB). Through QIP, companies can raise money with minimum disclosure.
GOLD RUSH
Company
Amount to be raised
(in Rs crore)
Yes Bank
1,141
Shriram Transport Finance
1,000
Karnataka Bank
500
Electrosteel Casting
600
HDIL
2,000
Jubiliant Organsys
1,000
Bharat Forge
675
Moser Baer
4,600
Usha Martin
468*
D S Kulkarni
500
(Source: BSE)
* Amount raised
“Activity has picked up from the second and third week of January,” said Abhay Bhalerao, director at Equirus Capital, a boutique investment banking company. He added that the reason of the activity is also due to positive sentiments towards equity market and India.
As many as five companies would raise Rs 5,311 crore in the next few days. They are Yes Bank, Karnataka Bank, Electrosteel Castings, Housing Development and Infrastructure Limited and Shriram Transport Finance. Usha Martin has already raised Rs 468 crore, taking this year’s tally to Rs 5,779 crore.
Others that have announced plans to raise funds through QIP are Jubilant Organsys, Moser Baer, Mahindra Forgings and D S Kulkarni.
The fund raising activity through QIP improved from March last year as the equity market started rising. Fifty-one companies collectively raised a record Rs 41,522 crore in 2009 compared to Rs 4,111 crore raised by nine entities in 2008. This was due to the bearish secondary market amid the global meltdown, which saw stock prices fall to record levels.
“Companies are timing the good market appetite to make a killing... it’s a scary sign. Only a few are genuinely going for capital expenditure,” said Kamlesh Kotak, head of research, Asian Markets Securities. Bhalerao of Equirus thinks most of the companies are fundamentally good. Many are raising funds to fund new projects and repay debt, he added. The banks would raise funds to enhance capital adequacy ratio.