Companies may fail to raise the projected Rs 40,000 crore.
The pace of qualified institutional placements (QIPs) since the beginning of this financial year has started to run out of steam.
While projections put the amount being raised through this instrument at as high as Rs 40,000 crore, most placements completed in the last few months are trading in red.
A study by Crisil Equities reveals that most QIPs in 2009 have given negative returns with 10 out of 13 placements during the period trading below the offer price. As on July 10, average returns from these QIPs were marginally negative. This is despite 75 per cent returns from the first QIP by Unitech. Excluding Unitech, the average are a negative 12 per cent.
Around one-fourth QIPs are trading 20 per cent below their offer price. In percentage terms, Bajaj Hindustan’s QIP has declined the most. Its current market price is around 28 per cent below the offer price. In absolute terms, Unitech (the second tranche sold at Rs 81) and HDIL have lost the most (more than Rs 450 and 350 crore, respectively).
Now, the Rs 40,000 crore projected to be raised via QIPs seems far off with some companies reducing the amount to be raised. Some have even scrapped their QIP plans.
The total amount raised through QIPs was Rs 12,500 crore. Unitech, through its two QIPs (in April and June), raised around Rs 4400 crore, or 35 per cent of the total. The Rs 50 crore QIP of Power Trading Corporation was the smallest. Among sectors, five real estate companies raised close to Rs 9,500 crore, or 76 per cent of the total.
There are over 30 other companies that have got shareholders’ nod for QIPs. These are Pantaloon Retail, JSW Steel, IndusInd Bank and S Kumars. Educomp raised Rs 607 crore via private placement last Thursday.
In the last two weeks, the markets have been volatile with a downward bias. Market experts said this could lead to a further fall in interest in QIPs. This is because under the Securities and Exchange Board of India's guidelines, the price at which the placement is done is the average of the last 15 days’ stock price of the company.
GMR Infrastructure was forced to call off its Rs 2,447 crore QIP on Monday after investors developed cold feet on concerns over valuation. Similarly, construction firm HCC had a mandate to raise Rs 1,500 crore but could raise only Rs 480 crore. Real estate firm Sobha Developers could raise only Rs 543 crore as against the target of Rs 1,468 crore, while GVK Power, say sources, has managed to raise Rs 611-734 crore as against a target of Rs 2,447 crore.
Chetan Majithia, head, Crisil Equities, said, “The significant run-up in stock prices before the 2009-10 Budget made QIP deals unattractive as fundamentals of most companies which queued up for these issues had not changed materially. With concerns over global economic growth persisting and delay in monsoon, the S&P CNX NIFTY is trading 15 times its FY10 expected earnings, which is rather expensive. With recent decline in prices and consequent erosion of the QIP investment value, we expect raising of capital through the QIP route to slow down significantly.”
