The total quantum of funds raised through equity issues in India has jumped almost five times in the first quarter of 2009-10. Thanks to a sharp revival in the stock markets, in the first quarter (April-June 2009), Indian companies have scooped up funds worth Rs 9,614 crore (~$2 billion) through IPO/FPOs, rights issues and QIPs (an equity issue which raises funds from a group of institutional investors) as against just Rs 1,985 crore in Q1 last financial year, according to data collated by Prime Database.
This has been possible even with lesser number of issues. As against 15 issues last year, there were only 13 IPO/FPO, rights and QIPs in the first quarter of the current fiscal. The exact quantum of overseas issues during the first three months last year is not clear but there were 3 overseas issues raising Rs 125.33 crore this year.
What Changed From 2008?
The big change which has come about within the last one year is the nature of equity issues which have been floated. Despite the market seeing a sustained rally over the last three months, there has been just two IPO/FPOs as against more than a dozen last year. In contrast, institutional investors have become a key target for raising funds.
This is apparent in the revival in QIP issues. There have been as much as 8 QIPs in the first quarter accounting for the bulk of funds raised from the market. QIPs have raised Rs 9,284 crore for the quarter, compared to not a single QIP last year in the same period.
The QIP bandwagon which started with Unitech raising over Rs 1,600 crore in April followed by Rs 500 crore placement by PTC and the mega Rs 2,656 crore placement by Indiabulls Real Estate has only gathered steam.
Although there have been some hiccups as in the case of GMR, which had to scrap its issue, others have managed to sail through even after GMR’s failed QIP.
In fact to an extent QIP revival could have also adversely impacted the revival of private equity deals in the country, which is still languishing. I-bankers say the lengthy investment decision process of PE firms has been the reason why many companies have switched over to QIPs to raise money.
Secondly, PE firms who had an opportunity of investing when markets and valuations were down did not take their chances and are now being shunned by many companies.