March has been a blockbuster month for IPOs. However, listed firms too aren’t lagging behind when it comes to equity transactions.
Over the past few weeks, several companies have successfully raised fresh equity capital through qualified institutional placements (QIPs). Also, there have been number of secondary share sales, helping existing investors and promoters divest their holdings.
Investment bankers said companies and funds are making a dash before the end of the financial year to raise capital. The move will help shore up their balance sheets, impacted by the Covid-19 pandemic, they add.
At least five companies have already raised or are in the process of raising a cumulative Rs 9,300 crore via QIPs. Further, existing investors or promoters have divested equity holdings worth Rs 14,200 crore through block transactions or offer for sale (OFS) this month.
The list of companies raising fresh capital is dominated by financials and realty firms. For companies operating in both these sectors, capital is often a key raw material.
“In the last two-three months, stock prices for several companies have moved up. And that explains the reason why so many QIPs have hit the market recently,’ said Venkatraghavan S, MD & Head of Equity Capital Markets, Equirus Capital.
The largest block transaction this month was the sale of treasury shares in BPCL worth Rs 5,525 crore followed by Carlyle’s 4.3 per cent divestment in SBI Cards to raise Rs 3,944 crore. In terms of QIPs, the largest was by Godrej Properties worth Rs 3,750 crore.
The deal pipeline this year has been underpinned by strong capital flows into the Indian market. Foreign portfolio investors (FPIs) have pumped in over $8 billion (Rs 58,000 crore) into domestic stocks so far this calendar year.
“Most equity deals are a function of surge in liquidity. The percentage allocation of foreign funds towards India is rising. If IPOs are getting oversubscribed, then it is only natural that QIPs and secondary sales too will be well-received by investors. As long as the liquidity persists, we will see QIPs, IPOs and block transactions taking place,” said Skanda Jayaraman, head-investment banking, Spark Capital.
The cumulative tally of equity transactions at listed companies to Rs 23,500 crore in March. On the other hand, nearly Rs 6,000 crore will be raised through IPOs this month.
There is a dire need for funds at many small- and mid-cap companies, mainly to retire debt or to get the business back on track. However, most of these companies are overlooked by large institutional investors.
If the latest bout of volatility, if persists, companies may have to apply brakes on fund raising plans.
The benchmark Sensex has come off nearly six per cent from its record highs on February 15. Whenever, stock prices fall in the secondary market current, companies or investors have to go for more dilution or settle for a lower fund raise.