The Hindu Business Line : QIPs abound, but analysts sceptical of their success

The initial euphoria for the first handful of QIPs has been replaced by fatigue. But QIPs cannot be written off and their success would be “issue specific,” they said.

“Companies with reasonable valuations will see their issues going through. Not all companies that have announced QIPs will succeed with the issue. Pricing is very important,” said Mr Krish Shanbhag, Head of Research at Antique Stock Broking.

Of the companies that announced their QIP plans since April, only five have completed their issues. “The issues that were completed show that the success of a QIP is not sector-related. Though the majority of the QIPs are from the real estate sector, the five companies that completed their QIPs are from a range of sectors,” said Mr Jagannadham Thunuguntla, Head Equity at SMC Capitals.

List of companies

The five companies to complete their QIPs are Unitech, Indiabulls Real Estate, Power Trading Corporation, Network 18 and Sree Renuka Sugars.

Some of the companies that have announced their QIPs include Hindalco, Tech Mahindra, Max India, Nagarjuna Constructions, Bank of Rajasthan, Bajaj Hindustan, Ansal Properties, HDIL, HDFC and Akruti City.

GMR Infrastructure, which announced its QIP on Monday, said on Tuesday that it is withdrawing the issue “in light of the existing market conditions”. This led to its stock price plummeting close to 9 per cent.

“The set of QIPs who have raised money from the market had done it at close-to-the-bottom valuations. At those valuations investors were interested. However, it remains to be seen if investor appetite remains at levels that are significantly higher than the levels at which the bulk of the fund-raising happened in the recent past. Clearly, from what we understand, some of the QIPs have had to withdraw from the market,” said Mr Prateek Agrawal, Head of Equity, at Bharati AXA Investment Managers.

The markets have rallied quite a bit since April and companies wanted to grab hold of this window of opportunity to raise capital. The QIP route was the easiest, said marketmen.

“A QIP issue does not involve the same hassles as IPOs, FPOs or rights issues. It is an easier and quicker means to raise much-needed liquidity. The real estate sector is the probably the most liquidity-starved, which is why we have seen the majority of the QIPs coming in from this sector. But investors are aware of the fact that conditions in the real estate sector have not improved much. Which is the reason why not all the issues have received the same response,” said Mr B. Madhuprasad, Vice-Chairman, Keynote Corporate Services.