Fundraising by means of certified institutional placement (QIP) was revived in 2023 after a lacklustre 2022, primarily attributable to fundraising by industrial banks. In accordance with knowledge compiled by Prime Database, Indian corporations raised Rs 53,070 crore in 2023, of which six banks raised Rs 21,290 crore or 40 per cent.
If different monetary establishments are included, the quantity will increase to Rs 26,690 crore. The funds raised by banks by means of QIPs this 12 months have been surpassed earlier in 2020 and 2017.
After cleansing up their stability sheets in the previous few years, banks are reporting wholesome progress with an increase in web revenue and enchancment in asset high quality, which has attracted buyers’ consideration.
“Banks have stabilised over the past two or three years, particularly the general public sector banks. They’ve cleaned their stability sheets, are attractively valued, and are a big a part of the index. There’s progress in property, and lending is growing, which requires banks to boost Tier 1 capital. With the supply of funds, which is there on the proper worth, they’re going forward and elevating funds,” mentioned Pranjal Srivastava, Associate-Funding Banking at Centrum Capital.
The rate of interest state of affairs has additionally stabilised this 12 months because the Reserve Financial institution of India stored the coverage repo fee unchanged since February. Between Might 2022 and February 2023, the repo fee was raised by 250 foundation factors to six.5 per cent.
“Final 12 months, we had a rising curiosity state of affairs, and there was web curiosity margin (NIM) compression. When NIM compression occurs, shares don’t transfer, and it’s laborious to boost capital. This 12 months, since March, rates of interest haven’t gone up, so all of the financial institution and non-banking monetary firm (NBFC) shares have revived, and it has turn out to be simpler to boost capital. And in a rising financial system, banking, monetary providers and insurance coverage (BFSI) will want capital constantly,” mentioned Ajay Garg, managing director of Equirus.
The Financial institution Nifty gained 11.4 % in 2023 in comparison with 18.5% in Nifty.
“When the financial system is doing properly, the credit score cycle will transfer up. And banks shall be required to boost capital due to the credit score progress we’re witnessing now. Corporations are placing massive capital expenditure, particularly producers. So, we are going to see extra QIPs occurring from manufacturing corporations and financials,” mentioned Dharmesh Mehta, managing director and chief govt officer of DAM Capital.
The great run of QIPs can be anticipated to spill into the subsequent 12 months, significantly within the run-up to the overall elections in April-Might subsequent 12 months.
Funding bankers estimate $5 billion to $7 billion of QIPs subsequent 12 months, and banks and monetary establishments are prone to represent 70 per cent of the fundraising.
“QIP is the quickest mode of fundraising for a listed entity. Extra are anticipated within the subsequent 12 months. The outlook is constructive, and the upbeat investor sentiment is anticipated to proceed. The pre-election rally is prone to occur. Banks will dominate the QIP pipeline subsequent 12 months due to the character of their enterprise. Capital is the uncooked materials for banks. They should increase capital after a spot and at any time when there may be progress in stability sheets,” mentioned Pranjal Srivastava, Associate-Funding Banking at Centrum Capital.
First Printed: Dec 19 2023 | 7:17 PM IST