Following the placing, at 50p, Modern Water will have over £15mln of cash at its disposal.
It had a strong cash position prior to the fund raising, but investors were still keen to back it further.
The placing was oversubscribed said Neil MacDougall, the company’s executive chairman, with the money earmarked for China and also acquisitions to beef up its monitoring division.
Modern Water’s flagship product is its forward osmosis technology, used primarily in desalination plants, which the company says can mean 40% energy savings, better product water quality and lower costs than existing technologies.
At present, 70% of desalination plants are located in the Middle East, but Modern Water expects China will become the second largest market in the next four years as industrial and biological pollution adds to an ongoing problem of water scarcity.
In December, Modern Water signed a framework agreement with Hangzhou Water, which has a 60% share of the Chinese desalination market, to add to a marketing agreement set up last year in the Middle East.
The group said it hopes to announce its first project with Hangzou within six months, while it is also looking for a partner to enter the Chinese industrial water market.
In monitoring, Modern Water makes products for the detection of toxicity, trace metals and environmental contamination. It intends to grow this side of the business by licensing and acquiring innovative, proven products to leverage its network.
Shares were 58.35p today. Most of the board acquired new shares in the placing.