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Sale of shares through QIP route, which allows listed companies to issue shares to institutional investors, seems to have lost the favour of the market, as the first nine months of this year have seen an 83 per cent decline in raising of such funds.
Companies raised Rs 3,344 crore through six Qualified Institutional Placement (QIP) transactions between January-September 2011, down from Rs 19,294 crore garnered through 42 such deals in the same period of 2010.
During entire 2010, companies raised Rs 28,339 crore through 53 QIPs, while Rs 32,631 crore was mopped-up via 45 QIPs in 2009.
Fund-raising through QIPs had slowed down this year due to volatile market conditions globally. Most investors were reluctant to participate in QIPs since the shares of many companies that were sold to institutional investors in the past were trading below the issue price, say market analysts.
“On the back of depressing market conditions, the QIP market seems (to have) virtually dried up in 2011. Indian companies are facing a difficulty in fund-raising.
“This will surely impact expansion plans and capacity building in the coming years, resulting in a slowdown in IIP and GDP numbers,” SMC Global Securities Strategist and Head of Research, Mr Jagannadham Thunuguntla, said.
The firms, which have raised capital through QIPs this year, include Canara Bank (Rs 1,993 crore), ING Vysya Bank (Rs 513 crore), Mahindra & Mahindra Financial Services (Rs 426 crore), Apollo Hospitals Enterprise (Rs 330 crore), Sumeet Industries (Rs 55 crore) and Excel Infoways (Rs 26 crore).
Further, some companies such as real estate developer Parsvnath and Insecticides India have plans to raise funds through QIPs.
A listed company choosing a QIP mode to raise funds can issue equity shares, fully and partly convertible debentures, or any securities other than warrants that are convertible to equity shares to a qualified institutional buyer (QIB).
Interestingly, QIP was the most unfavoured route by the Indian companies compared to other modes such as public issues, rights issues and preferential route due to volatile market conditions.
The BSE 30-share index, Sensex, has plunged 4,716.68 points or 22 per cent per cent so far this year.
The Sensex, which was at 20,000 points in January, fell below the psychological level of 16,000 on the last trading session. It closed at 15,792.41 on Wednesday, down 0.73 per cent from the previous close.
Most of the funds raised so far this year appear to be through the preferential placement route. The companies raised Rs 27,361 crore through preferential allotments during the January-July period of 2011.
In addition, Indian firms garnered Rs 12,803 crore through 25 public issues in the January-July period of 2011.
Further companies mopped up Rs 5,519 crore through rights issues.
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