The economic slowdown has not only impacted the investment plans of India Inc but also corporates fundraising activity, both through equity as well as debt route.
According to latest data by Securities and Exchange Board of India, corporates could mobilise only Rs 12.4 crore through two public issues in August. This is a decline of 98 per cent from Rs 618.5 crore raised through four equity and debt issues in July.
The picture is quite dismal for the April-August period too. In the first five months of 2012-13 fiscal, corporates have mopped up a total of around Rs 1,140 crore through 13 issues as against Rs 10,371 crore raised through 30 issues during the corresponding period year ago.
With both primary and secondary markets remaining quite subdued since January, qualified institutional placement (QIP) has emerged as a preferred option for companies looking to raise funds.
During August, companies raised Rs 2,210.7 crore through 12 QIP issues (all of which were on account of conversion of warrants issued on QIP basis into equity) compared to `1,898 crore raised through eight QIP issues in July. On a cumulative basis, a total of Rs 4,651.5 crore has been mopped up by Indian companies through the QIP route so far in the current fiscal.
A qualified institutional placement is a fund raising tool used primarily by listed companies whereby equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares are issued to a qualified institutional buyer. Apart from preferential allotment, QIP is the only other fast method of private placement whereby a listed company can issue shares or convertible securities to a select group of persons.
QIP scores over other methods because the issuing company does not have to undergo elaborate procedural requirements to raise this capital.
Things have been quite subdued in the corporate debt market also. The data showed that a total of Rs 34,892 crore has been raised through 186 issues by way of private placement on stock exchanges during August, a decline of 40 per cent compared to Rs 57,745 crore raised through 202 issues in the preceding month.
The downturn in the stock markets and poor investor sentiment has also impacted resource mobilisation by mutual funds with Rs 19,806 crore as compared to Rs 38,457 crore mobilised during July.