Fundraising through qualified institutional placements (QIPs) has reached an all-time high in 2024, surpassing the Rs 1 lakh crore mark for the first time ever in a calendar year. In 2024 till date, 82 companies have raised around Rs 1.23 lakh crore through QIPs to set a new benchmark.
Interestingly, it is almost on par with the quantum of funds raised through initial public offers (IPOs) this year as 76 firms have cumulatively raised 1.34 lakh crore through public issues.
More importantly, with a month to go in 2024, market participants believe that QIP fund raising this year could outpace the IPO collections as well. In 2023, 45 companies had raised approximately Rs 52,350 crore through QIPs, a significant leap compared to Rs 11,743 crore raised by 14 companies in 2022.
Jayant Mundhra, an independent research analyst suggest buoyant market sentiments, and the consistently heavy inflows from the retail and domestic investors segments have meant that there is almost always a massive amount of money which is looking for assets to get into. And this big inflow of money has been serving as an alternate option for listed companies to raise capital for growth, operational needs or contingencies. And given the bullish sentiments which have captured the markets for over four years now, this has emerged as an attractive option to secondary markets.
Among the largest QIPs in 2024, Vedanta and Zomato led the way, each raising Rs 8,500 crore. They were followed by Adani Energy Solutions and Varun Beverages, which raised Rs 8,373 crore and Rs 7,500 crore, respectively.
Other significant QIP transactions during CY24 included Samvardhana Motherson International at Rs 6,438 crore and Godrej Properties at Rs 6,000 crore. Additionally, JSW Energy, Prestige Estates Projects, and Punjab National Bank each raised around Rs 5,000 crore through QIPs.
While QIP and IPO fundraising trends indicate robust investor confidence in India Inc that is looking to deploy funds towards capital expenditures and acquisitions, experts advise a bit of caution as well.
Jathin Kaithavalappil, Assistant Vice President at Choice Broking, says that execution is key. Mismanagement of these resources could inflate valuations, ultimately harming long-term returns, he says.
This assumes significance as the Indian economy continues to grow at a strong and stable pace and the demand for capacity expansion is on the rise with many emerging businesses leveraging technology, necessitating fresh capital investments.
Vinod Nair, Head of Research at Geojit Financial Services, highlights the risks associated with execution, technological obsolescence, and valuation. Failure to address these challenges could lead to overcapacity and strain corporate balance sheets, ultimately affecting profitability, he said.
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