Institutional Investors Flock To QIPs Amid IPO Frenzy

Institutional investors appear to be increasingly favouring qualified institutional placements as an avenue for funding Indian companies despite the recent surge in initial public offerings and the substantial amounts qualified institutional buyers have subscribed in them.

This preference is evident in the year-over-year trend of the QIP activity, which hit at least a decadal record of Rs 90,586 crore in 2024, with the June quarter seeing an all-time high QIP activity both in terms of volumes and values, according to Grant Thornton Bharat.

This surge reflects heightened institutional confidence in the QIPs as a strategic funding method for companies.

Despite the high-profile nature of the IPOs, institutional investors have shown less consistent enthusiasm for them when compared to the QIPs.

Although the IPO market has been active in 2024, with the QIBs pumping in Rs 60,938 crore so far, they have failed to match the 2021 level when institutional investments in IPOs stood at Rs 82,025 crore, according to data from Prime Database.

"QIP activity reached an all-time high, making it a preferred choice of fundraising for listed companies," Shanthi Vijetha, partner at Grant Thornton Bharat LLP, said.

While the QIBs have actively participated in both IPOs and the QIPs, the amounts subscribed in the QIPs have consistently outpaced those in the IPOs over the past few years. This suggests that the institutional investors are increasingly recognising the benefits of the QIPs as a more efficient and potentially more lucrative fundraising strategy.

Foreign investors, particularly, have been pumping liquidity into India's primary market while the scrips trading in the secondary market have become costlier.

In 2024, foreign investors bought shares worth over Rs 65,000 crore in the primary market, which consists of initial public offerings, preferential allotments and sales to large investors. This is the highest since 2021, according to data available on the National Securities Depository Ltd.