QIP rush: 10 companies launch issues in December

QIPs, when 2 muted years, have shown signs of revival, with capital raised via forty one QIPs reaching a brand new high of Rs 56,800 large integer (12 times over CY16) to this point in twelvemonth 2017 (CY17)
 
 There is a rush to tap funds from qualified institutional placement (QIP) route with 10 companies, including banks, have launched QIP issues in December thus far, the highest in past seven years in terms of number of issues.

Total eight companies that include Punjab National Bank (PNB), Mahindra & Mahindra (M&M) Financial Services, Natco Pharma and Union Bank of India have already raised Rs 11,037 crore via QIPs in the current month.

Most of these companies intend to use the proceeds primarily for repayment or pre-payment of outstanding indebtedness and towards capital expenditure. The financials proposed to use funds for augment their long-term resources for meeting capital requirement and to augment their capital adequacy ratios.

In April 2010, total 10 companies had raised Rs 2,723 crore, while in September 2009 (Rs 6,245 crore) and in December 2008 (Rs 9,412 crore) 10 firms mobilized more than Rs 6,000 crore through QIP. In value terms, during June 2017, three companies had raised Rs 17,505 crore via this route, the PRIME Database data show.

Kridhan Infra and Srikalahasthi Pipes have opened their QIP issues on Wednsday, December 20, 2017. These two companies propose to raise Rs 400 crore, taking total tally by 10 QIPs to Rs 11,437 crore. Of these 10 companies eight have mobilized Rs 9,667 crore in past two weeks alone.

“After a awfully lasting, the buoyance within the markets has sustained. Investors — each domestic and foreign — have redeployed funds within the equity market. until the markets stay vivacious, individuals / promoters can prefer tocollect cash for future growth, and this trend is probably going to continue in CY18 similarly. we are able to expect this amendment on condition that there’s a change within the market conditions,” explains A K Prabhakar, head of analysis, IDBI Capital.

QIPs, when 2 muted years, have shown signs of revival, with capital raised via 41 QIPs reaching a new high of Rs 56,800 crore (12 times higher than CY16) thus far in calendar year 2017 (CY17). This variety has surpassed the previous year’s Rs 4,712 crore, and is that the highest until date, beating the sooner peak of Rs 34,676 large integer raised by 53 firms in CY09.

In the banking house, HDFC Bank, the country’s second-biggest loaner by assets, same on Wednesday it’d agitate to Rs 24,000 large integer to fund growth by marketing shares to investors, together with a advantageous issue to its parent development Finance Corporation (HDFC). geographic region Bank, too, is reportedly considering raising funds via this route.
 “As regards HDFC Bank, i feel it’s making a monetary fund for consequent 5 years. Promoters wish to create the foremost of the market conditions immediately,” Prabhakar adds.

And the call to boost funds via QIPs has been well-tried right. Given the market conditions, stocks of 28 out of forty firms that raised funds via this route are mercantilism higher than their QIP worth. Minda Industries (up 208%), Deepak radical (122%) and Delta business firm (101%) have seen their value quite double as compared to the QIP costs. Ramkrishna Forgings and Camlin Fine Sciences have rallied by 65 and 51, severally.

“The trend of raising cash via QIPs is probably going to continue. From a amount wherever individuals were doing plenty of off-market transactions to provide non-public equity players Associate in Nursing exit route, we have a tendency to are currently talking regarding growth capital. This underlying trend is probably going to continue. PSU banks took this route as they needed to position themselves before the recapitalization by the govt,” says Munish Aggarwal, director — capital markets, Equirus Capital.