NW18: Study shows funds via QIPs 21 bln rupee since Jan, down 77% on yr

NewsWire18, Friday, Sep 26

.
Sankalp Saini

NEW DELHI - The amount of funds raised through qualified institutional placements has fallen 77% to
around 21 bln rupees between Jan 1 and Sep 25, a study by Delhi-based NEXGEN Capitals Ltd. has
showed.
During the corresponding period last year, 92.5 bln rupees were garnered through QIPs.

QIP is private placement of shares or convertible securities by listed companies to institutional buyers
such as banks, mutual funds, foreign institutional investors, and insurance companies. The number of
QIP issues during this period has fallen to four from 15 in the year ago period.
The four issues include Sintex Industries Ltd., Sunil Hi-Tech Engineers Ltd., Dynamatic Technologies and
Bank of India.

NEXGEN Capitals is the merchant-banking arm of Delhi-based brokerage SMC Global Securities.
Volatility in primary markets, subdued activity in the initial public offer market, differences over valuations
and the current financial turmoil in the U.S. has made things difficult for companies planning to or which
have already announced plans go in for QIPs.

Since mid-January, the benchmark indices have lost over 35%. The 30-share Sensex had touched a
lifetime high of 21206 on Jan 10. Similarly, the 50-share Nifty had scaled a lifetime high of 6357.10 on
Jan 8.

"The QIP activity is a function of the secondary market. Also, there has been a disconnect between
companies and institutional buyers over valuations. Not much action is expected at least on the QIP front
for another quarter," said Nitin Khandkar, senior vice president, Keynote Research.
"Due to valuation issues and volatile market conditions, institutional buyers are not willing to put their
money into QIPs. Also, many of these institutions have lost 40-65% of their investments in similar fund
raising instruments in the past," Rajnish Rangari, country head, investment banking, Keynote Investor
Service Ltd., said.
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INDIA INC

QIPs seem to be losing flavour with India Inc.

In fact, the slump in markets has forced real estate major Unitech Ltd too put on hold its $1.5 bln QIP.
"There is no plan for the qualified institutional placement as of now," Managing Director Sanjay Chandra
had said during the company's post-earnings conference in June.

Engineering and construction major Larsen & Toubro Ltd's, which has got an enabling resolution for
raising up to $600 mln via a QIP, is keeping a close watch on the markets.
"The QIP is a faster mode of raising capital. It is from that view that we got the QIP approval from
shareholders, The market confidence is not likely to improve over the next 12 months," R. Shankar
Raman, executive vice-president, finance, Larsen & Toubro, said.
He, however, maintained that the "company is still long on cash."

In August, DLF Ltd. had said it plans to raise around 100 bln rupees through qualified institutional
placement. The company will seek shareholders' nod for the issue at its annual general meeting slated for
Sep 30.