Fuelled by improved market sentiments and robust underlying demand, fundraising by issuing shares/units to institutional investors soared to Rs 78,000 crore in 2023-24, a more than seven-fold surge year-on-year. The 2024-25 fiscal is expected to be very robust as companies will continue to garner capital for capex post-election results.
“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 also very strong year from a primary capital perspective as companies will continue to look to raise capital for capex post-election results,” Neha Agarwal, MD & Head of Equity Capital Markets at JM Financial Ltd, told PTI.
Financial companies raise funds through qualified institutional placement (QIP) to meet their additional capital requirement buffer to support their growth plans and enhance their business.
QIP is one of the quickest products to raise funds from institutional investors. It is designed for the listed firms and investment trusts, which allow them to mobilise funds quickly from institutional investors without the need to submit any pre-issue filings to market regulators.
According to data compiled by Prime Database, fundraising through the QIP route reached Rs 78,089 crore in 2023-24, which was way higher than Rs 10,235 crore mopped up in the preceding financial year. This included fund mobilisation by REITs and infrastructure investment trusts (InVITs) through the QIP mode.
Before that, Rs 28,532 crore was mobilised through the QIP route in 2021-22 and an all-time high of Rs 81,731 crore in 2020-21.
Of Rs 78,089 crore collected in FY24, a total of Rs 68,933 crore was raised by 55 companies through the route, remaining Rs 9,156 crore was mopped up by one REIT and two InvITs.
Brookfield India Real Estate Trust garnered Rs 2,305 crore through QIP, National Highways Infra Trust mopped up Rs 6,181 crore and Grid Trust collected Rs 669 crore through the route.
Market experts attributed the primary reason for the increase in QIP fundraising to the market and investor sentiments that play an important 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 surged by 32 per cent during FY24. The growth in the capital market was backed by domestic inflows of funds, which led to optimism in the street.
The soaring growth in the indices implied that many companies got re-rated with respect to their valuation. This provided an opportunity for companies to raise money at a higher valuation and utilise the funds to fuel future growth, he added.
QIPs were dominated by banking and financial services companies, as they accounted for 58 per cent (Rs 40,020 crore) of the overall amount.
With Investors’ interest coming back to the PSU sector in FY24, many public sector banks raised funds through QIP. Such state-owned banks accounted for 27 per cent of the total amount.
Another key theme in 2023-24 was capital raised by REITs and InvITs, contributing 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 noteworthy contributors to the fundraising spree included Cholamandalam Investment & Finance, Federal Bank, IDFC First Bank, Aditya Birla Capital and Bank of Maharashtra.
Listed companies that need funds either to meet their capex requirements or to comply with Sebi’s 25 per cent minimum public shareholding norms generally opt to raise funds through the QIP route.
Further, compared to rights issues or follow-on public offers (FPOs), the QIP route takes less time and has fewer compliance norms.
