QIPs returned with Rs 56,000 crore bang this year

After a dull show last year, qualified institutional placements (QIPs) are back with a vengeance as stock markets are on a roll.

While new firms have tapped the initial public offering (IPO) route with zeal, raising a record Rs 65,900 crore till November, listed corporates too have raised over Rs 56,000 crore in 2017 through speedy QIPs, the highest ever amount garnered through this route in a calendar year.

According to data from stock exchanges, 33 equity QIP issues till November this year have garnered a total of Rs 45,762 crore through this window of opportunity that allows institutions, both domestic and foreign, to buy shares of listed firms.

The previous record was of Rs 34,676 crore raised via 53 issues in 2009 when markets had zoomed 81% after wilting under the weight of global financial crisis in 2008.

Moreover, December has already witnessed a clutch of firms including Punjab National Bank, Union Bank and Mahindra & Mahindra Financial Services raising over Rs 10,000 crore. Syndicate Bank was also looking to mobilise around Rs 1,200 crore. Compare that to 16 QIP issues raising a mere Rs 4,712 crore in the whole of 2016 when broader stock markets inched up by just 2%.

"This year also saw the largest QIP issue in the history of the Indian equity market (State Bank of India with a size of Rs 15,000 crore). The year is dominated by financials," said Motilal Oswal Securities Ltd.

Other big QIP issues in 2017 have been Kotak Mahindra Bank (Rs 5,800 crore), PNB (Rs 5,000 crore), Bajaj Finance (Rs 4,500 crore), and Interglobe Aviation (Rs 3,800 crore).

With around ten days to go before the year ends, the final tally in 2017 could increase as some more firms are keen to take advantage of the buoyancy in the markets.

"The institutions are surely getting a lot of liquidity. Naturally, promoters would be happy to relieve them the burden of too much liquidity. Plus, when promoters find the institutional investors happy to get unburdened at high, higher and still higher valuations, why not? This is a sign of a bull market, but we can't infer from all this that we are in a bubble and the market will crash," said Vikas Gupta, CEO and chief investment strategist, OmniScience Capital.

The calendar year 2014 was also a big year for QIPs, with a whopping Rs 31,684 crore collected from 33 issues after the NDA government's advent lifted the sentiment towards economy and markets. In 2015, the fund-raising levels dropped to Rs 19,000 crore.

Between 2011 and 2013, QIP wasn't a preferred capital raising tool with about Rs 16,000 crore coming in three years.

Experts say most of the firms use the QIP funds for purposes like shoring up capital, retiring debt, keeping funds for strategic uses like mergers and acquisitions and other corporate purposes.

"QIPs are less cumbersome than follow-on offerings. The company doesn't have to file a pre-issue document with the regulator and only files a placement document with the stock exchanges. It is also a less expensive mode of raising capital than FPO or rights issue for a listed corporate," said an investment banker who is working with a few upcoming issues.

For the qualified institutional buyers too, QIPs come without any strings attached. For example, in an IPO, an anchor investor, usually an institution, has to stay invested for a month; there are no such restrictions with QIPs.

Also, institutions can get a large chunk of shares without paying higher impact cost. The gains in prices of QIP stocks has also meant that institutions are not exactly complaining. Data for last 10 QIP issues shows that seven have delivered returns over the respective QIP issue price.

MONEY MATTERS

• The year also saw the largest QIP in the history of Indian equity market - SBI's issue of Rs 15,000 crore
   
• The previous record for QIPs was of Rs 34,676 crore raised via 53 issues in 2009