Highs on Street Fail to Lift QIP Investors Out of Their Lows
Mumbai: The midcap index may have hit an all-time high but qualified institutional investors continue to sit on losses in majority of their investments in exclusive share sales by companies in the past two years. Shares of midcaps such as Supreme Infra, Ramco Systems, J Kumar Infra, Talwalkars, HSIL, Marksans Phar ma and Salzer Electronics, which raised funds through qualified institutional placement (QIP), are trading 20-60% below their issue price. This explains why fundraising through QIP has dried up, with just five companies in the past five months raising about ₹ 250 crore in all through this route.
“Valuations are at the higher side and investors who have burnt their fingers will not be willing to invest in QIPs, and hence, there is complete slowdown in this route,” said Dara Kalyaniwala, senior vice presidentinvestment banking at Prabhudas Lilladher. “QIPs in this volatile market are difficult as investors would prefer to invest in IPOs rather than putting money into listed companies unless the valuation is reasonable.”
In 2016, only 16 companies raised about ₹ 4,712 crore through QIPs, lowest in the past five years, whereas 32 raised about ₹ 19,065 crore in the previous year, as per Prime Database.
In 2014, 33 companies had raised about ₹ 32,000 crore through QIPs. Promoters of debt-ridden companies had rushed to raise funds
through QIPs at higher valuations owing to high expectations generated by the Narendra Modi government. However, the stocks started tumbling as the gap between the expectations and reality widened.
Companies from capital intensive sectors such as infrastructure, power and real estate are still exploring the option of QIPs, but there are no investors at their current valuations, said a banker.
Ramco Systems, which raised over ₹ 325 crore in 2015, is trading about 46% below its issue price. Mumbaibased J Kumar Infra’s shares are trading at a 39% discount to its QIP price, which raised over ₹ 400 crore. Similarly, Talwalkars, HSIL and Marksans are trading at a discount of more than 25% to its offer price.