Fundraising QIP slumps in turbulent year for securities mkts

Despite the recent rise in initial public offerings, the market for qualified institutional positions (QIPs), a way to sell shares quickly to institutional investors, was still reduced due to difficult secondary market.

The QIP market saw just one transaction in November and December, and 14 deals overall in 2022, as companies raise capital. $11,743 crore via this route, data from the Prime Database that tracks primary markets. That’s a 72% reduction in funds raised through this roadmap from 2021, when 35 companies raised $41,997 crore via QIP.

Global macroeconomic challenges, including geopolitical tensions in Europe and Asia, rising inflation and interest rates, and recession fears, have added to market volatility. and reduce the activity of the QIP market.

“QIP is a product of a bull market and historically we have seen QIPs happen when the secondary market is recovering when companies want to dilute their equity to a low level. higher valuation. “In 2022, there are a lot of bearish trends, especially in the first half of the year, and the market is volatile, which doesn’t help the cause,” said Pranav Haldea, chief executive officer of the Prime Database team. core.

Thị trường QIP chỉ chứng kiến ​​một giao dịch vào mỗi tháng 11 và tháng 12 và 14 giao dịch tổng thể vào năm 2022, khi các công ty huy động <span class=₹11,743 crore through this route” title=”QIP market has only one transaction in November and December, and 14 overall in 2022, when companies raise ₹11,743 crore through this route “>

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The QIP market saw just one transaction in November and December, and 14 deals overall in 2022, as companies raise capital. $11,743 crore via this route

This year’s biggest QIP was by real estate firm Macrotech Developers, which saw investors buy shares worth of $3,546.9 crore, followed by AU Small Finance Bank and Indian Hotels Co Ltd, both raised $The data shows 2,000 crore from the sale of their shares. Other companies that have tapped into the QIP market include Restaurant Brands Asia Ltd, Indiabulls Real Estate Ltd and Ujjivan Small Finance Bank, among others.

“The weak demand for QIP is the result of relatively high valuations and signs of a soft global market as well as early signs of a recession in the West. This has led to muted demand from investors and hesitation from promoters to initiate QIP. Samir Bahl, managing director of Anand Rathi Advisors, said.

Bahl said QIPs have remained silent even as the IPO market has seen strong activity due to the former providing limited price flexibility to companies, making it difficult to execute trade in volatile markets. “The IPO market remains strong, but the prices of recent IPOs have been revised downward and expectations have been reset. Pricing flexibility is limited for QIP due to regulatory requirements,” he said.

Haldea said global macro difficulties and economic downturn made companies cautious about capital raising plans, thus reducing demand for QIP.

“QIP is a product used to raise new capital. Therefore, companies need to have a way to deploy capital. Given the macroeconomic headwinds, there’s a bit of uncertainty about how 2023 will play out. So companies are following a wait-and-see approach. This, coupled with the record amounts raised through QIPs in 2020 and 2021, and as a result, companies already having more capital than they needed, seems to have contributed to the QIP crowdfunding. getting low,” said Haldea.

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