SME Times News Bureau | 07 Jul, 2010
In the absence of virtually no regulatory approvals, India Inc. has drawn up elaborate plans to raise a whopping amount of over Rs. 40,000 crore through Qualified Institutional Placements (QIPs), an instrument which the industry has found as a quick way to cash in upon the secondary market revival, a new study said.

The study conducted by smc Capitals and ASSOCHAM pointed out that the reason is that the QIPs have very limited regulatory restrictions. In case of an IPO, FPO (Follow on Offering) or any other fund raising mode, it would take about four-five months whereas in the case of a QIP everything can be wrapped up in a matter of four-five days.
 
It revealed that 50 companies have already taken their board and shareholder approvals to raise the projected amount for the stated purpose, big names among whom include Tech Mahindra, Essar Oil, Omaxe, Ansal Properties, JSW Steel Ltd., Spice Mobiles, etc.

Releasing its findings, ASSOCHAM President, Swati Piramal said that other important corporate entities that have already taken their board and shareholder approvals for QIP comprise Jet Airways, Triveni Engineering & Industries, Adani Enterprises Ltd, Godrej Consumer Products and Omnitech Infosolutions Ltd.

Qualified institutional placement (QIP) is simply the means whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a Qualified Institutional Buyer (QIB).

Market regulator Securities and Exchange Board of India (SEBI) introduced the QIP process in 2006, to prevent listed companies in India from developing an excessive dependence on foreign capital.

The reason as to why QIP route is being chosen by corporates is also because capital markets look to be more stable as far as Indian corporates are concerned, the study added.

"In the QIP route, capital is raised by prompting swift transactions and it is one reason corporates plan to retire their debts to make their balance sheet less leveraged," ASSOCHAM quoted the report in a press release.

In case of a preferential allotment, the price at which the preferential allotment has to be done is the average of six months or two weeks – whichever is higher. However, in the case of a QIP, the pricing is the average of the last two weeks, the joint study pointed out.