89% decline in funds raised via QIP route
Stock Market Market Research
By
Anand Rawani, Shruti Verma
Sep 24 2008, New Delhi
Funds raised through qualified institutional placement (QIP) have come down sharply. From $5.00 billion raised
through the QIP route in 2007, the funds have dipped to $0.53 billion in the current year, a decline of 89.40 per cent,
according to a report released by broking firm SMC Global.
“The number of QIPs have fallen to four in 2008 from 29 in 2007,” it said. Till now, firms have raised funds worth
$6.59 billion through the QIP route. But due to the steep fall in the equity market, their current mark-to-market (MTM)
value is confined to $3.96 billion. The total number of QIPs stood at 49, out of which 82 per cent were in losses and
only 18 per cent made profit. “In the past couple of years, the equity markets performed extremely well. Since early
January this year, risk aversion has gone up. This is one of the reasons that funding from not only QIP but also other
sources has witnessed a slowdown. We do not see any immediate revival in QIPs”, said Amitabh Chakraborty,
president, equity, at Religare Securities.
The current MTM losses are across the industries. Real estate is the biggest loser with –68 per cent followed by
infrastructure with –54 per cent. Companies such as Ansals, GMR, Phoenix Mills, Peninsula Land, Mahindra
Lifespaces, Suzlon Energy are among the biggest losers in terms of current MTM values. In May 2006, the SEBI had
issued guidelines for QIPs, according to which any listed company could raise funds by issuing equity shares to
qualified institutional buyers. In a financial year, any company can raise up to five times its previous year's net worth.
This is issued to QIPs through private placement.
The report said, “QIP guidelines came in May 2006 and the first placement happened in September 2006. During
September to December 2006, QIP volume was $1.05 billion.”