QIP, 'a bull market product', plunges in 2018

Mumbai: The past three months between August and October have not seen a single company raising money through qualified institutional placement (QIP). The number of companies opting for fund raising through QIP route has also dropped 83.29% between April and October this year over the same period last fiscal, due to volatile market conditions, with only nine firms raising a total of around Rs 5,596.14 crore in the past seven months.

Shares prices of eight of these nine companies are also currently trading significantly below their QIP issue price.

In the last three months between August and October, not a single listed company has tapped the QIP route, according to data available with market-tracker Prime Database. Last time this happened was in 2016, when no issue came out in March and April. A similar sentiment was witnessed in 2013-14, the year before the 2014 general elections, when only six companies raised Rs 9,402 crore cumulatively through QIP, according to the database.

Last fiscal, around 51 companies had raised Rs 57,523.76 crore through QIPs, with 20 companies raising around Rs 33,501.83 crore between April and October, 2017. Pranav Haldea, managing director, Prime Database Group, said QIP is a “bull market product”.

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According to him, throughout this year, the market has been fairly volatile, which has resulted in lesser number of QIPs getting launched.

QIP is meant for fresh capital raising by firms. However, for the last three-four years, a trend is visible where not much fresh capital was raised by companies for investment, setting up additional capacities, etc, he added.

Last fiscal, a total of 10 banks came up with QIPs, including the Rs 15,000 crore issue by State Bank of India in June 2017. Other banks were Punjab National Bank, Federal Bank, Bank of Maharashtra, Dena Bank, Syndicate Bank, Union Bank among others.
Apart from HDFC Bank, no other bank raised capital through QIP in the current fiscal.

Haldea said “PSU banks have taken a beating and thus are reluctant to launch their QIPs in such times”.

A K Prabhakar, head-research, IDBI Capital, said that only a few indices have hold in the market in the past six months, while most stocks have seen a decline. In QIP, foreign investors are largely interested, but in the past six months there had been a significant outflow of foreign funds “One cannot dilute stake when foreign investors are not interested,” he said.

Haldea said that due to volatile markets, one has also seen lesser interest from institutional investors, especially foreign portfolio investors (FPIs).

This year so far, foreign portfolio investors (FIIs) have sold equities worth $4.4 billion in the domestic market. Except one company, the share price of all other companies, which raised money through QIP, are currently trading below their issue price.

Ugro Capital Ltd, which raised Rs 113 crore at an issue price of Rs 140 per share, has seen a 42% jump in its share price. Its shares closed on BSE on Tuesday at Rs 199.65 per scrip.

On the other hand, HDFC Bank raised Rs 2,774.99 crore at an issue price of Rs 2,160 per equity share in July. Its shares closed at Rs 1,929.20 per scrip on Tuesday on BSE, 11.96% lower than its issue price.

In September this year, Kwality Ltd, which was dragged to the National Company Law Tribunal (NCLT) by KKR India Financial Services for Rs 1,200 crore default, tried to raise around Rs 80 crore of capital through QIP. The issue opened on September 14 with a floor price of Rs 21.20 per share, but failed to generate investor interest. The QIP was withdrawn, as per a regulatory filing made by the company on September 21. Kwality’s shares closed at Rs 8.51 apiece on BSE on Tuesday.

In April, Kolkata-based Magma Fincorp raised Rs 500 crore through QIP at an issue price of Rs 155 per share. On Tuesday, its share closed at Rs 109.60 per scrip on BSE, 29.29% lower than its issue price.

Bangalore-based Gokaldas Exports Ltd, too, raised Rs 69 crore in April at an issue price of Rs 90 per share, while its shares are currently trading at Rs 75.65 apiece, a fall of 15.94%.

In May, four companies tapped the QIP route. Ganesha Ecosphere Ltd raised Rs 100 crore at an issue price of Rs 377 per share. The shares closed at Rs 278.40 per scrip on BSE, 26.15% below its issue price. Minda Corporation Ltd raised Rs 310.69 crore at an issue price of Rs 173.47 per share. Currently, its shares are trading 24% below its issue price at Rs 131.60 apiece.

This article was first published in DNA Money: QIPs drop to a trickle this year