Qualified Institutional Placement fundraising touches Rs 78,000 crore in FY24

QIP Investments: Propelled by refined market sentiments and strong underlying demand, issuing shares or units by fundraising to institutional investors rose to Rs 78,000 crore in 2023-24, marking over a seven-fold surge year-on-year.

The 2024-25 fiscal is anticipated to be very robust as companies will continue to gather investment for capex after election results come out.

''In an unprecedented era of economic development aided by pro-business reforms and macroeconomic stability, India is set to become the third largest economy globally by 2027 and will continue to see strong flows.”

''In this backdrop, we expect FY25 to be also a very strong year from a primary capital perspective as companies will continue to look to raise capital for capex post-election results,'' according to Neha Agarwal, MD & Head of Equity Capital Markets at JM Financial Ltd.

Financial companies raise funds through qualified institutional placement (QIP) in order to reach the buffer for their surplus capital needs, for supporting their growth plans and boost their business.

QIP is one of the fastest means to raise funds from institutional investors. It is formed for listed firms and investment trusts, which permit them to gather funds speedily from institutional investors without the requirement of submitting any pre-issue filings to market regulators.

Prime Database suggests fundraising through the QIP route touched Rs 78,089 crore in 2023-24, which was way higher than Rs 10,235 crore wiped in the previous financial year.

This consisted of fund mobilisation by REITs and infrastructure investment trusts (InVITs) through the QIP mode.

Before that, Rs 28,532 crore was collected through the QIP route in 2021-22 and an all-time high of Rs 81,731 crore in 2020-21.

Of the Rs 78,089 crore mobilised in FY24, a total of 55 companies raised Rs 68,933 crore through the route, with the remaining Rs 9,156 crore was tidied up by one REIT and two InvITs.

Brookfield India Real Estate Trust collected Rs 2,305 crore through QIP, while National Highways Infra Trust resolved Rs 6,181 crore and Grid Trust garnered Rs 669 crore through the route.

Market experts pinned the actual reason for the rise in QIP fundraising to sentiments in the market and investors that have an instrumental role in their success.

''With improved market sentiments and strong underlying demand, companies looked to raise capital to seize growth opportunities,'' JM Financial's Agarwal said.

Akshay Tiwari, Fundamental Analyst at Religare Broking, said the Indian stock market continued to rally, wherein the benchmark indices Nifty 50 rose by 32 per cent during FY24. Rise in the capital growth market was on the back of domestic inflows of funds, which led to street optimism.

The rising growth in the indices meant that several companies got re-rated with respect to their valuation. This gave a chance to companies to raise money at a greater valuation and use the funds to propel future growth, he added.

QIPs were governed by banking and financial services companies, accounting for 58 per cent (Rs 40,020 crore) of the overall amount.

With the interest of investors coming back to the PSU sector in FY24, several public sector banks garnered funds through QIP. 

These state-owned banks attested for 27 per cent of the total amount.

The capital raised by REIT and InvITs was another key theme in 2023-24 which contributed 13 per cent of the fundraising.

The largest fundraising through this route was from Bajaj Finance, which raised Rs 8,800 crore, accounting for 13 per cent of the total QIP amount. 

Other notable contributors for the fundraising spree included Cholamandalam Investment & Finance, Federal Bank, IDFC First Bank, Aditya Birla Capital and Bank of Maharashtra.

Listed companies that required funds either to reach their capex requirements or to be in line with Sebi's 25 per cent minimum public shareholding norms generally opt to raise funds through the QIP route.

Additionally, when aligned with rights issues or follow-on public offers (FPOs), the QIP route takes lower time and has lesser norms for compliance.

(With PTI Inputs)