Fund-raising through the qualified institutional placement (QIP) route hovered near a 40-month high in November 2023 with listed companies mopping up around Rs 12,150 crore - the highest since August 2020.
In 2023, a total of around Rs 42,000 crore was raised by around 35 companies through QIP, the largest amount raised since 2020. Out of this, over 70 percent was raised by banking and non-banking finance companies. The rest of the funds were used by manufacturing companies. These are seen as indications of a revival in private capex, but the amount is very small still, analysts said.
Analysts emphasise that banks raising capital will fortify their financial base, underscoring the critical necessity for the Indian banks to promptly bolster their capital reserves. This measure is crucial to meet ongoing provisioning requirements and rising risk-weight for certain segment of loans to gear up for potential future credit expansion.
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Few analysts suggest banks and NBFCs are raising funds primarily in anticipation of increased credit growth and to meet mandatory reserve needs. Analysts also suggest that the rise in capital adequacy is due to the RBI raising the risk weight on consumer loans, necessitating smaller and midsize banks to do more provision funds to consumer credit.
Bajaj Finance Ltd led the biggest QIP, raising around Rs 8,800 crore. Union Bank of India and Bank of India followed, taking home approximately Rs 5,000 crore and Rs 4,500 crore. Other significant fund-raisers included Cholamandalam Investment & Finance (Rs 4000 crore), Federal Bank (Rs 3040 crore), IDFC First Bank (Rs 3000 crore), Aditya Birla Capital (Rs 1750 crore), and Bank of Maharashtra (Rs 1000 crore).
Among companies, Suzlon Energy had the largest QIP, securing around Rs 2000 crore. Sheela Foam (Rs 1200 crore), Apar Industries Ltd, Blue Star Ltd, and Ramkrishna Forgings Ltd (Rs 1000 crore each) were also noteworthy. Additional companies such as RHI Magnesita India, Aether Industries Ltd, Texmaco Rail & Engineering Ltd, Rategain Travel Technologies, Happiest Minds Technologies, PG Electroplast, Data Patterns India, Orchid Pharma, HFCL, Power Mech Projects, and others also participated in QIPs.
The rush to raise funds hints at a resurgence in private capital expenditure, according to analysts. They note that corporate average capacity utilisation has surpassed 73.6 percent, signalling the need for brown capex. India is poised to set up fresh manufacturing capacities for global markets due to stable domestic growth.
There's heightened demand in infrastructure, renewables, and consumption sectors. Simultaneously, a thriving stock market, fuelled by investor interest, entices corporates to offer high returns, thereby limiting equity dilution and maintaining favourable debt-to-equity ratios, the analysts said.
Sneha Poddar, an analyst at Motilal Oswal, observes that many corporations are leveraging the thriving secondary market by raising funds through QIPs at more favourable valuations.
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In 2022, 14, listed compaies raised Rs 11,743 crore through QIPs, a notable difference compared to 35 companies raising Rs 41,997 crore a year earlier and 35 firms raising Rs 80,816 crore in 2020 treading the same route.
Analysts anticipate the trend of raising funds through QIPs will persist, at least through the first half of the next year. Vinod Nair, an analyst at Geojit Financial, shared optimism about the stock market, particularly in the first half, expecting a pre-election rally and a slump in global bond yields, fostering a risk-on sentiment.
However, there might be a slowdown in QIP deals in 2024 during the national election period, coupled with potential recession risks in developed nations, Nair said.
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