Introduced in 2006, QIP was aimed at reducing India’s over-reliance of foreign capital.

A revival in the stock market’s fortunes in 2012-13 did little to persuade jittery companies to come out with public and rights issues during the financial year.

But, Qualified Institutional Placement (QIP) activities witnessed a modest revival and emerged as the favoured route for fund-raising for the first time ever.

Around Rs 15,000 crore were raised through 43 QIP deals in the first 11 months of 2012-13, seven times higher than the mop-up in the whole of 2011-12, according to SEBI data.

Of this, four deals accounted for over half of the cumulative deal value.

These include the largest-ever QIP by Axis Bank which raised Rs 4,726 crore. The other major QIPs were executed by IndusInd Bank (Rs 2,000 crore), Dewan Housing Finance (Rs 304 crore) and Godrej Properties (Rs 470.8 crore).

Foreign investors

Consequently, shares held by Foreign Institutional Investors (FII) in some of these firms, have witnessed an increase. From 32.9 per cent in end-March 2012, FIIs’ holdings in Axis Bank shot up to 39.6 per cent in February 2013, when the issue took place.

Similarly FIIs’ holding in IndusInd Bank rose from 35 per cent to 39.1 per cent between March and December last year. The issue was conducted in November 2012.

QIP issuances have been on the decline since 2010-11 amid difficult economic conditions at home.

From a record Rs 4,322.8 crore via 64 issues in 2009-10, the quantum of QIP fund-raising fell to just Rs 2,162.3 crore in 2011-12.

While it was easy to raise funds from institutional investors, retail investors moving away from primary and secondary market resulted in sharp decline in funds raised through public and rights issue.

These issues declined 50 per cent this fiscal year at Rs 22,220 crore.

Introduced in 2006, QIP was aimed at reducing India’s over-reliance of foreign capital. It reduced the complexity associated with raising domestic capital from a select group of Qualified Institutional Buyers (QIB), which was a pool of institutional investors such as banks that were deemed to possess the capital and ability to make rational investment decisions.

Most active sectors

A sector-wise analysis of fund-raising activities in April 2012-February 2013 reveals that the banking and telecommunications sectors were the most active during the 11-month period.

While banking accounted for 23 per cent of the total funds raised from public and rights issues and QIP, telecom companies’ share of the total mop-up was 22.7 per cent.

But, fund-raising activities were more muted in sectors like engineering, chemicals, cement and construction, entertainment, plastics, food processing and information technology in 2012-13; each raised less than Rs 1,000 crore during the year.

Other unspecified sectors took in 43.1 per cent of the funds raised, as per SEBI.

(This article was published on April 8, 2013)
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