Funding Crunch?
Qualified institutional placements losing sheen
KUMAR GAUTAM
Funding growth will become tougher for companies as qualified institutional placements (QIPs) are not
finding takers in the Indian market. QIPs allow listed companies to raise funds from the domestic market
from various institutions.
Companies have just been able to raise $0.53 billion (Rs 2,500 crore) this year till date through QIPs as
compared to $5 billion (Rs 22,860 crore) in 2007, according to data complied by merchant banking
company NEXGEN Capitals.
Says Jagannadham Thunuguntla, head (equity), NEXGEN Capitals: “QIPs were a favored route to
raise funds because it does not require clearance from the Securities and Exchange Board of India
(Sebi). It is also preferred over private equity, as the investors in QIPs are not given board (management)
seats, unlike private equity.”
This year only four QIPs have come in the market as against 29 the previous year. “It is definitely
because of volatile market conditions. There will not be any QIPs in the next 1-2 years,” says
Jagannadham.
QIP investors in the real estate sector have been the worst hit.
However, any sector which is capital expenditure driven will feel the heat.