Debutants opt for GDRs as QIPs gets tough

Newly listed companies are being forced to look overseas to raise funds following the one-year listing rider for qualified institutional placements (QIPs).

Indiabulls Real Estate, which was demerged from Indiabulls Financials this March, has raised $400 million through a global depository receipt (GDR) issue. Development Credit Bank (DCB), which was listed last October, is planning a GDR issue.

Market sources said the other likely candidates for GDRs include First Source Solutions and Dish TV. Dish TV was demerged from Zee Tele Films and listed in April 2007.

Pyramid Saimira, which got listed in January 2007, opted for a foreign currency convertible bond to raise $90 million in June. The bonds, on conversion, will be listed on the Singapore exchange.

Markets regulator, the Securities and Exchange Board of India (Sebi), in April barred companies with less than a year listing history from QIPs.

QIP was introduced in May 2006 to allow companies listed in Indian markets to raise funds through placement of shares to foreign and domestic institutions.

Investment bankers, however, are not perturbed. "Only newly-listed companies which have immediate capital requirements, will find it difficult," says S Ramesh, chief operating officer of Kotak Mahindra Capital. QIPs have been gaining ground with 19 companies raising about $1.62 billion (Rs 6,500 crore) in 14 months after the instrument was introduced in India.

IDFC raised $500 million last week through the biggest-ever QIP issue. Some other big issues include $300 million by GVK Power & Infrastructure and $240 million by Max India.

"For newly listed companies, QIPs is a closed option. But, we feel, Sebi has decided on this to ensure that companies that are raising capital should raise enough resources for at least one year's use, before going for another issue," said another banker.

Disclosure norms for QIPs are fewer as the shares are placed with institutional investors. Further, the time taken to complete a QIP is much faster compared with a normal share issue.

Going for Plan B

QIP was introduced in May 2006 to allow companies listed in Indian markets to raise funds through placement of shares to foreign and domestic institutions

The instrument has been gaining ground with 19 firms raising about $1.62 billion (Rs 6,500 crore) in 14 months after it was introduced

The Sebi in April barred companies with less than a year listing history from QIPs