21 Asian Legal Business | January-February 2025 “These are quality investors who take a long-term view on the fundamentals of the company ensuring price stability. To add, they are preferred investors on the cap table of any corporate and yet allow companies to maintain significant control without diluting ownership,” Mookerjee notes. QIPs come with built-in advantages that make them particularly attractive to both companies and investors. The pricing follows a formula set by India’s market regulator, SEBI, based on recent stock performance. Add in an allowed 5 percent discount, and you’ve got a recipe that’s proven irresistible to mutual funds and sovereign wealth funds. “QIPs present an attractive proposition for investors since there is no regulatory lock-in and unlike a preferential allotment, there is no need to declare the name of the investor upfront unless the allotment is made,” Jha adds. Outlook 2025 The momentum shows for QIPs no signs of slowing. In December 2024 alone, 27 companies received board approval to raise funds through QIPs. With markets showing signs of cooling off, some might expect the QIP party to wind down. Market experts aren’t so sure. They point to surplus cash sitting with domestic institutional investors, particularly mutual funds, as fuel for continued QIP activity. Capital markets “Issuers planning to use the QIP route will have to be careful in a volatile market,” warns Lahoty. The key challenge is to navigate the floor price requirement – based on trading price over the preceding two weeks. “If the price of shares is falling in the run-up to the launch, the floor price may be higher than the ruling market price making it difficult to attract investors. We do expect issuers to be prepared to launch deals as soon as they get a window,” he adds. But that window is larger for QIPs than most other alternatives. With a 365-day validity period for shareholder approvals – compared to just 15 days for some other methods – companies can play the long game, waiting for the right moment to strike. This allows companies “to be flexible in their strategy and to potentially time the market,” Mookerjee explains. Still, certain sectors look primed for QIP action. Financial services firms, facing growing pressure from stressed assets, are likely candidates. Additionally, infrastructure companies, pharmaceutical manufacturers, and textile firms are also expected to use this route. “We feel the QIP activity would continue to remain buoyant even on account of cyclical correction in the markets for capital-intensive businesses as well as growing requirements of the existing businesses,” Jha says. “The situation may, however, change in case of significant rate cuts by RBI thereby easing the lending rates.” LEADING INDIAN LAW FIRMS FOR QIPs IN 2024 Firm Name Number of deals Khaitan & Co 23 JSA 20 Trilegal 20 Cyril Amarchand Mangaldas 18 Crawford Bayley & Co 14 Shardul Amarchand Mangaldas & Co 13 Dentons Link Legal 10 IndusLaw 6 Saraf and Partners 5 Chandhiok & Mahajan 3 LEADING INTERNATIONAL LAW FIRMS FOR QIPs IN 2024 Firm Name Number of deals Hogan Lovells Lee & Lee 29 Duane Morris & Selvam 20 Dentons U.S. 11 Linklaters 7 Sidley Austin 6 Latham & Watkins 3 A&O Shearman 1 Freshfields 1 White & Case 1
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