SBI Leads $9.2 Billion Wave of Indian Fast-tracked Share Sales
State Bank of India’s recent record offering is leading a summer onslaught of a fast-tracked type of share sale as local companies take advantage of this year’s stock-market rally to raise funds.
About 40 Indian firms, led by banks, announced plans in July to raise more than 800 billion rupees ($9.2 billion) through qualified institutional placements, according to data compiled by primedatabase.com.
That may put Indian QIPs, which are only offered to professional investors, on track for one of their biggest years on record.
QIPs have become a popular way for local companies to raise funds fast — these deals can be executed within weeks, instead of the months it usually takes to carry out public offerings in India.
After the country’s benchmark index climbed every month from March through June, optimism is running high that institutional investors will continue to snap up such deals.
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“Robust secondary markets and ample liquidity have created conducive conditions for fundraising,” said Amrendra Singh, group head of equity capital markets at SBI Capital Markets Ltd.
“Banks are raising money to meet capital requirements, while companies are looking to improve their finances and fund future growth.”
But the more companies issue shares through initial public offerings or QIPs, the higher the risk they will absorb the money that would have otherwise gone to the stock market. India’s benchmark Nifty 50 Index has pulled back some its gains in recent weeks amid concerns over things such as tariff negotiations, putting the gauge on track for a decline in July.
More than 10 other lenders, including Axis Bank Ltd., IDBI Bank Ltd. and IndusInd Bank Ltd., have announced plans to raise a total of more than 500 billion rupees, according to the data compiled by primedatabase.com. Beyond banks, firms such as Reliance Power Ltd., Reliance Infrastructure Ltd. and Amber Enterprises India Ltd. have also announced fundraising plans.
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“Companies are preparing to use this window to raise capital at higher valuations,” said Pranav Haldea, managing director at Prime Database Group. “The QIP route offers companies a fast-track option to mobilise funds, while providing institutional investors an opportunity to acquire sizable stakes at a predetermined price.”
This year, 25 companies have raised 561 billion rupees through QIPs, according to data compiled by Primedatabase. Though it may be difficult for this year’s tally to exceed 2024’s record 1.36 trillion rupees raised through this type of offering, recent announcements indicate this year’s total could surpass the 808 billion rupees raised in 2020.
QIPs are offered to large professional investors, allowing listed issuers to bypass the regulatory scrutiny and marketing typically needed for follow-on public offerings, shaving months off the process.