Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

.

Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

.

Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

.

In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

.

Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

.

2009 was the year of the QIPs. QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs. . QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

.

Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

.

Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

.

QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

.

In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

.

According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

.

Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

.

Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

.

“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

.

QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

.

.

[Via http://smcinvestment.wordpress.com]