QIPs prime source of funding for Indian corporates: SMC

By Jagannadham Thunuguntla,
Strategist & Head of Research, SMC Global Securities Limited

1. Fund-raising by Indian companies through QIP (Qualified Institutional Placement) has been fairly robust despite volatile market conditions. In the period from January to August 2013, the total funds raised through QIP is about Rs 12,354 Crores through 20 issuances. The amount raised through QIP till August 2013 has already surpassed the total QIP fund raising of Rs 8,969 Crores in the year 2012 through 20 issuances. (QIP) is a capital raising tool whereby a listed firm can issue equity shares to institutional investors.

2. Some of the key issuances during 2013 include that of Axis Bank with the QIP size of Rs 5,537 Crores.

3. Introduced in 2006, QIP was aimed at reducing India’s over-reliance of foreign capital. It reduced the complexity associated with raising domestic capital from a select group of Qualified Institutional Buyers (QIB), which was a pool of institutional investors such as banks that were deemed to possess the capital and ability to make rational investment decisions.

4. As the market condition has been sluggish since June 2013 due to various domestic and international issues, the fund raising through QIPs has slowed down in the recent months.

5. However, one may see improvement in QIP market in the coming months due to increased fund raising from banks through this route. As of now government is expected to encourage PSU banks to take the QIP route to raise additional capital. In this connection, government may allow State Bank of india to raise around Rs 8,000 crore of equity capital either through a QIP or FPO.

6. The finance ministry is also likely to allow four other state-run banks, including Syndicate Bank, United Bank of India, and Union Bank of India, to raise capital through the QIP route. The fund raising by the banks is part of the government's programme to capitalize state run banks. Actually, the budget has a provision of Rs 14,000 crore towards this end.

7. All in all, QIP as a fund raising instrument has made very significant inroads in the Indian corporate sector since its launch of 2006. The capital market conditions during 2006 to 2013 have made the fund raising through QIP quite volatile. However, the sheer ease and convenience of the fund raising mode through QIP will pave the way for more robust action in this space once the market conditions and confidence return.

Year	Number of Issues	Total Amount (in Rs Crores)
Year 2009	45	32,631
Year 2010	53	28,339
Year 2011	9	3,459
Year 2012	47	8,969
Year 2013 (till August)	20	12,354

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