% Firms tap funds to meet Covid threat

QIP most preferred fundraising route

With uncertainties looming over widespread economic disruptions from the Covid-19 lockdown, Indian companies are lining up huge fund raising programmes to wade through the difficult times.

Several leading companies are looking to raise funds to the tune of Rs 20,000-30,000 crore from secondary market sales and the QIP route.

Among the biggies, telecom major Bharti Telecom Ltd on Tuesday mobilised Rs 8,433 crore by selling 2.75 per cent stake in to institutional investors in the secondary market.

Kotak Mahindra Bank also hit the market with a Rs 7,500-crore qualified institutional placement (QIP).

Bharti has said that it will use the proceeds from the sale for pruning debt and become a “debt-free company.

Kotak Bank said it will use the proceeds to bolster its balance sheet as the disruption caused by coronavirus is expected to impact its asset quality, as well as to tap opportunities arising out of the crisis.

"In these time of Covid19 pandemic, big companies are showing their strength and are going ahead with stake dilution to either to cut their debts or deleverage their balance-sheet," says Sumit Bilgaiyan, founder, Equity99 Advisors.

Gaurav Jain, director, Hem Securities, said, "Secondary market offering through the QIP route continues to remain strong with large deals taking places with good interest from foreign investors. In fact, a number of new investors from the US and other far eastern countries have started looking at India as an attractive market given its resilience in an economic lockdown.

Several housing finance companies are also planning to raise funds to bolster their capital buffers and prepare for future uncertainties amid widespread economic disruptions from the Covid-19 outbreak, according to merchant banking sources.

Investment banks have, meanwhile, approached markets regulator Securities and Exchange Board of India (Sebi) for relaxation in pricing norms for one of India Inc's most preferred fundraising route—qualified institutional placements—to make it easier for listed companies to raise funds in view of the Covid-19 pandemic.

QIP is a fast-track route that allows listed companies to raise capital from institutional investors through equity or equitylinked instruments.

In the five-year period from 2015 to 2019, corporate India raised ?1.31 lakh crore from QIPs, data from primary market tracker Prime Database shows. So far this year, companies have raised ?20,360 crore via this route.

Merchant bankers are seeking an increase in the extent of the discount that companies can offer on the floor price calculated under Sebi guidelines.

Under rule, the floor price of the QIP offering cannot be less than the average of the highest and the lowest price of the shares in the past two weeks. Companies can offer investors a discount of up to 5 percent on the floor price.