The recent spate of qualified institutional placements (QIPs) may have started off smoothly, but the road they are on now definitely seems to be rough. And the going looks likely to get tougher.
Considered as corporates’ favourites for raising money, QIPs that were placed recently have not been as forthcoming in churning gains as expected, and are in fact giving negative returns.
The bad news is not confined to the QIPs already concluded, but has also spanned the instrument as such too. Market fears are being voiced that QIPs might not even be able raise the projected amounts this year, as investors are going to be turned off by the performance of the recently-concluded ones.
Another reason there may be a dearth of QIPs in the near future are the Securities and Exchange Board of India (SEBI) guidelines, which say that the price at which the QIP placement is done should be the average of the last 15 days’ stock price of the company.
Crisil Equities indicates that more than half of the QIPs concluded this year are already giving negative returns, most of whom are trading below their offer price.
What has come as a surprise is that despite registering significant gains from QIP of Unitech, which was the first in the section and delivered positive returns of around 75 per cent, the total returns on investments remained marginally negative, reports Economic Times.
A QIP is a capital raising tool, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any other securities other than warrants which are convertible to equity shares to a Qualified Institutional Buyer (QIB).
The reason that has negatively impacted the QIPs is that stock prices have spiralled downwards over the last two weeks due to stock markets being mostly on the downward trend, post-Budget especially.
Gauging the mood and acting according to the market sentiment was GMR Infrastructure Limited. It has cancelled its fund-raising plan via QIPs recently in the wake of not getting an adequate response.
Unitech and HDIL have lost the most value for QIPs -- by more than Rs 450 crore and 350 crore respectively. However if one excludes Unitech, the overall returns remained negative by 12 per cent.