QIPs Outstripped PE Funding & IPOs in Fund Raising Process ;)


Qualified institutional placements (QIPs) have outstripped private equity (PE) funding since January by at least eight times, making it by far the most popular fund-raising route for firms this year.


QIPs raised at least Rs. 21,209 crore since January this year, while PE funds invested only Rs. 2,574 crore in listed firms.


QIPs have almost raised more than twice of initial public offerings.

A QIP is a private placement by a listed company of shares or securities convertible to equity with qualified institutional buyers approved by market regulator Securities and Exchange Board of India(SEBI).


Data from Delhi-based investment bank SMC Capitals Ltd shows another 48 QIPs worth Rs.43,891 crore are in the pipeline.

But analysts do not expect a significant rise in the number of, or funds through, PE deals this year.


Typically, PE investments take up to six months to complete, whereas a QIP can be done in up to four weeks, making the fund-raising process faster and more reliable since the institutional buyers are selected carefully.


Also, in a QIP, the institutional buyers rarely seek a seat on the company board, or management control, a common practice in large PE deals.


Since PE is perceptionally intrusive for promoters, QIP serves as a good alternative.

However this QIP structure is liked by investors and firms as in a QIP the window is shorter and money can be raised quickly.


While real estate firms typically prefer QIPs for their need of capital at short notice, the companies currently waiting to do QIPs are across sectors, including telecom, entertainment, retail and information technology.


In line for QIPs are Reliance Communications Ltd, Pyramid Saimira Theatre Ltd, Pantaloon Retail (India) Ltd  and few more.


Some firms, though, have taken both routes for their funding needs.

Historically, PE investments in India have been in the form of private investments in public enterprises, or PIPEs, which also happen to the only firms eligible for QIPs.


“Private equity investors have missed the boat,” Jagannadham Thunuguntla, head of SMC Capitals, said in a statement.

Companies that are in the pipeline for QIPs may also look for American depository receipts or global depository receipts for funds, he  added.


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