More Companies Rediscovering the QIP Route

CEIC India Data Talk: The use of Qualified Institutional Placement (QIP) in India as a means of raising capital has started regaining momentum during 2012. New capital raised during the first ten months of the 2012-2013 fiscal year (that ended March 2013) amounted to INR 92.09 billion, consisting of 39 issues, compared to the INR 21.62 billion raised during the fiscal year ended March 2012. The increase in capital raised via the use of QIP occurred as capital raising through both primary public and rights issue has been declining since the 2010-2011 fiscal year. Public and rights issues raised INR 213.56 billion in new capital during the first ten months of the 2012-2013 fiscal year, compared to INR 484.74 billion raised during the 2011-2012 fiscal year and INR 676.08 billion in the 2010-2011 fiscal year. Introduced in 2006, the QIP seeks to reduce over-reliance on foreign capital by reducing the complexity and formality associated with raising domestic capital – equity, or securities otherwise convertible to equities – from a select group of Qualified Institutional Buyers (QIBs); QIBs represent a pool of institutional investors which are deemed to possess both capital and the ability to make reasonable strategic investment decisions. They include public financial institutions, scheduled commercial banks (including Nationalised Banks, Foreign Banks, Regional Rural Banks, among others), registered mutual funds, multilateral and bilateral development financial institutions, and venture capital investors, among others. As opposed to profitability issues (Entry Norm I) and appraisal route (Entry Norm III), securities issued through the QIP route (or officially, the Entry Norm II) should allocate at least 50% of its issue towards QIBs through book-building and include a minimum post-issue face value capital of at least INR 100 million. QIP emerged as a major financing tool during the fiscal year ended March 2010 when it raised INR 432.28 billion, a record high, compared to INR 575.83 billion raised through public and rights issues during the same period. The use of QIP has declined since, owing to the poorer economic climate, but very recently it has seen some revival in use, having been employed by various entities including the Axis Bank, IndusInd Bank Ltd, Dewan Housing Finance and Godrej Properties, among others, as investors start seeing some growth in the equity markets. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Chan Yee Lui - CEIC Analyst Back to Blog
5th April 2013 More Companies Rediscovering the QIP Route

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