The Hindu Business Line : MFs opt for QIP route to invest in cos

Though investments in such schemes — Qualified Institutional Placements (QIPs) — are barely a few months old, one fund, Sundaram BNP Paribas Mutual has used this route to acquire a large quantity of shares of Spentex Industries, a textile company based in Delhi.

The scheme allows big funds to pick up a large stake in companies the way large institutional investors do. The Security and Exchange Board of India's guidelines allow mutual funds to buy up to 10 per cent of the stake that companies offer while trying to raise money.

In-depth knowledge

Retail investors currently can participate in this scheme only through mutual funds, said Mr Sandesh Kirkire, CEO of Kotak Mahindra Asset Management Co Ltd, which is looking at this scheme, which was unveiled in May. Unlike in public issues, this route gives funds in-depth knowledge about companies, since they are already listed, he added.

"For Mutual Funds to participate in such schemes, the company has to be largely driven by conviction and fundamentals," said Mr A. Balasubramanian, Chief Investment Officer of Birla Sun Life Mutual Fund. But "we will have to be selective and choosy," he said. Mr Kirkire said, "We should be satisfied with the quality of business and quality of management to participate in this route."

According to Mr Prateek Agarwal, Vice-President and Head of Equities at ABN AMRO Asset Management, "Valuations of the company should be attractive and should fit our criteria. Though we have not participated yet, we are certainly looking at the route."

Mutual funds do not bet on a particular segment of companies. "Large- and mid-cap companies should ideally opt for QIPs but we will be looking at companies with strong fundamentals," said Mr Rajeev Anand, Chief Investment Officer, Standard Chartered Mutual Fund.

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