QIP fund-raising zooms as investor confidence returns

Raising capital through the qualified institutional placement (QIP) route has been a hit this calendar year, with four issues already mopping up Rs 11,455 crore in the first five months - nearly 30 per cent more the Rs 8,075 crore 10 companies raised in full 2013. In fact, the amount raised this year has been the highest since 2010 (see chart).

The return of investor confidence in the equity markets is bringing some of the large companies back to the fund-raising table. The country's largest lender, State Bank of India, raised nearly Rs 8,032 crore through its QIP issue earlier this year. In the past three months, YES Bank, Idea Cellular and KSK Energy have also come out with their QIP issues.

Since the 2008 equity-market meltdown, companies had been struggling with ballooning balance sheet deficits and few avenues for raising capital. High interest rates and poor equity-market returns, too, made capital-raising unfeasible.

"Most firms looking to raise funds at this point are capital-intensive ones. So, we will see a lot of fund-strapped large-cap firms in the banking, power, infra and capital goods sectors hitting the capital market," said ICICI Securities Executive Director Ajay Saraf.

However, industry officials said, companies across sectors could be seen tapping the capital markets over the next two years.

According to industry estimates, the total funds raised this year could be around Rs 30,000-40,000 crore, four to five times the amount raised last year. Bankers are confident that sustained foreign institutional investor (FII) interest would see these issues through.

"The environment for raising funds is very conducive, as FIIs' faith in the market has returned. There is enough money and good appetite among these investors," said V Jayasankar, senior executive director and head (equity capital markets), Kotak Investment Banking.

Some of the public-sector banks that had postponed their QIP issues in February due to volatile market conditions are also set to test the waters with an improvement in sentiment. On Monday, state-run IDBI Bank informed the exchanges it was planning a QIP issue or a public offer to raise Rs 4,000 crore. Apart from capital to fund business growth, public-sector banks, reeling under asset-quality pressures, will also need funds to absorb loan losses through making provisions.