Given the multitude of options available for raising funds, Qualified Institutional Placement can be termed as a potential tool for doing so. It can be used by a listed company who can issue equity shares, securities other than warrants, partly and fully convertible debentures which can be converted into equity shares to a Qualified Institutional Buyer (QIB).
Among the many players indulging in this prospective practice, a few names include Ansal API, Shoppers Stop and SKNL among others.
Real estate major – Ansal Properties and Infrastructure has recently raised over Rs 230 crore via private placement of shares to institutional investors. According to sources, the Company would utilise the funds raised through qualified institutional placement (QIP) to save on its high cost debt and execute the various ongoing projects across the country. One of its most prestigious projects includes a 2,500 acre hi-tech city in Dadri, adjoining Greater Noida.
We also have S Kumars Nationwide Limited (SKNL), a leading Indian textile and apparel manufacturing company, which also recently announced that the company has raised US$ 50mn (Rs 235 crores) by issuing fresh shares to Qualified Institutional Buyers (QIBs). J. P. Morgan India Private Limited, Edelweiss Capital Limited. and Antique Capital Markets Private Limited were the book running lead managers to the issue.
Mr Nitin Kasliwal, Managing Director and Vice Chairman of SKNL said, “This fund raising initiative is in alignment with our stated vision of Clothiers to the nation today and the world tomorrow and enhancing the value proposition of our businesses. The funds raised will be utilised for the growth plans of the company. We are a global leader in fabrics to fashion and look to consolidate our leadership position by adding more capacities in India and pursue international growth opportunities.”
Also, joining the bandwagon is Retail chain – Shoppers Stop. According to the Company statement, the Company has launched the QIP for upto 2 million Equity Shares from QIBs- FIIs, MFs and other institutions. The floor price is 648.88. Enam Securities Private Ltd is the Global Coordinator and Book Running Lead Manager and IDFC Capital Ltd is Co - Book Running Lead Manager.
Future Value Retail Ltd, part of Kishore Biyani promoted Future Group also recently revealed its plans that it is looking at QIP, issuing of warrants, private equity and even going public to fund the proposed expansion (keeping in mind its plan to invest around Rs 600 crore to expand Big Bazaar).
What’s clicking with QIP?
QIP, introduced by SEBI in 2006, holds the capacity to enable the listed companies to raise money from the domestic markets within a short time frame. Yet another advantage this method implied by this method is to prevent the Indian companies from having over dependence on the foreign capital.
Thus, the introduction of the QIP removes many complications that have been initially associated with raising funds from our domestic markets, not involving many procedures to work out to bring it to life with the market regulator.
Many companies that were hit by the financial meltdown had raised money with the markets showing signs of revival, brightening the expectations of a large number of issues in the near future. Mr. J.K Jain, VP-Finance, Provogue (India) Ltd. opines, “QIP is a tool to attract quality investors into portfolio of the company’s shareholding list. By doing so, the companies are able to raise funds from the selected people and are able to avoid full process of going for FPO. We do not have any plans as of now for going for QIP, as our company is having sufficient equity to execute its expansion plans.”
The future hot route
There are broadly two ways companies can raise cash from the capital markets –Debt and Equity and Companies intending to raise money through equity have various ways of doing so. Few of the popular means include – Initial Public Offering (IPO, Rights issue and Private Placement/ QIP.
With the renewed hope in the economy, people who were sitting at the sidelines want to jump into action and companies want to speed up their expansion plans and move swiftly. QIP is an instrument which could fit perfectly in this situation mainly because of key points like timing (an IPO takes time), cost (a QIP is cost effective), ease of exit (if an institutional investor invests through an IPO there is a minimum lock in period involved).
No wonder companies are queuing up to raise money. Well, who would like to miss an opportunity of making a quick buck!