Vedanta, Adani Energy lead QIP charge as fundraising reaches ₹58,425 crore

Mumbai: Fundraising through qualified institutional placements (QIPs) has touched a four-year high in 2024 thus far, marking a threefold increase from last year.

In the period January to August, 55 companies have collectively raised ₹58,425 crore through QIPs, compared to ₹17,643 crore in the same period of 2023, according to data from primedatabase.com. 

Further, the month of July saw the highest amount of money being raised through this route ( ₹21,813 crore) in 2024.

QIPs allow companies to issue new equity shares or convertible securities to institutional investors. A QIP issue leads to equity placement, resulting in dilution of existing shareholders' ownership. 

“QIPs are essentially a bull market product, thriving in bullish secondary markets where companies can issue fresh shares at higher valuations," said Pranav Haldea, managing director, Prime Database Group. "Companies utilize QIPs to raise fresh capital when economic prospects are good and demand is strong, driving expansion and growth initiatives.”

Mining giant Vedanta has led the way so far this year, raising ₹8,500 crore. Adani Energy Solutions is a close second with ₹8,373 crore.

Other notable fundraisers included JSW Energy, which raised ₹5,000 crore, Swan Energy ( ₹3,319 crore), and MacroTech Developers ( ₹3,281.85 crore).

Additionally, Union Bank of India, Coforge, Angel One, Shyam Metalics & Energy, and Techno Electric & Engineer cumulatively raised ₹9,375 crore.

QIPs have seen a turbulent phase during the covid-19 pandemic.

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Data sourced from primedatabase.com shows that after some fluctuations, funds raised through this mode surged to a record high of ₹80,816 crore in 2020 (full year) raised by 25 companies. 

This number crashed by nearly half in 2021, with 35 companies mopping up just ₹41,997 crore. The next year, 2022, was worse, with only 14 companies raising ₹11,743 crore, the lowest since 2016.

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Thereafter, 2023 (full year) saw a moderate rebound. That year, 45 companies raised a cumulative sum of ₹52,350 crore.

“Primarily, banks or financial services, real estate, infrastructure, metals and energy sectors dominate QIP fundraising, leveraging its fast and efficient nature,” Haldea said. 

Further, industries such as information technology, and engineering and construction, have also turned to this financing tool in 2024.

Is the boom here to stay?

The pipeline looks healthy. A total of 73 companies are set to tap the QIP market, aiming to raise ₹1 trillion to fuel their growth and expansion plans.

Among these are IndusInd Bank, which is seeking to raise ₹10,000 crore, and Mankind Pharma and Punjab National Bank, each targeting ₹7,500 crore, according to primedatabase.com.

Union Bank of India ( ₹6,000 crore), GMR Airports Infrastructure, Jindal Stainless, AU Small Finance Bank, Prestige Estates Projects, Torrent Pharmaceuticals, and Central Bank of India, plan to raise ₹5,000 crore each.

“Given the current bullish secondary market and favourable macro factors, companies are likely to continue to raise money for expansion, with QIPs remaining the preferred mode of fundraising,” Haldea concluded.

Even as QIPs have surged, another mechanism used by companies, follow-on public offers (FPOs), saw only one major deal, Vodafone's ₹18,000 crore FPO in April, with no other significant activity.

This highlights the strong preference for QIPs among companies looking to raise capital.

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Anand K. Rathi, co-founder, MIRA Money, said that QIPs have gained popularity over FPOs as they offer faster access to capital with relatively easier regulations. Additionally, a six-month lock-in period reduces near-term volatility.

“Mutual funds and institutions are also actively seeking investment opportunities in good companies, with possible investment requirements,” Rathi said. “Furthermore, QIPs provide a price advantage as the promoters determine the price, and a time advantage over FPOs.”

Rathi added that these factors make QIPs an attractive option for companies to raise capital, especially in a scenario where a lot of money is chasing good companies.