The QIP rush continues

Glenmark Pharmaceuticals Ltd. raised about Rs4bn from a QIP issue of shares to institutional investors at Rs221 each. Glenmark was seeking to raise US$75mn with an option to raise additional funds. A company spokesman was quoted as saying that the QIP proceeds would primarily be used to reduce debt. The issue opened on Thursday and closed early Friday morning. Enam and Citigroup were the bankers to the deal.

Bangalore-based maker of medical diagnostic equipment, Opto Circuits India Ltd. raised Rs4bn from qualified institutional buyers (QIBs). The company's QIP issue which opened on September 8 closed late evening on the same day following a huge response from QIBs. The company's QIP committee had fixed Rs186.63 as the floor price per equity share of Rs10 each.

NG Vysya Bank Ltd. successfully completed a QIP of Rs2.3bn. The bank said in a statement that 9,270,455 equity shares of Rs10 each were placed at a price of Rs248.1 per share with QIBs. A preferential allotment of 7,493,478 equity shares will be made to the ING Group, at the same price, which will enable the Dutch parent to maintain their stake at 43.93% in the Indian arm. The total capital raised, from the QIP and Preferential Placement (PP) is around Rs4.15bn. The QIP issue was opened on 7th September and received good demand well above the targeted capital, with a mix of domestic and foreign institutions participating in the process, ING Vysya Bank said. The capital raised will augment the Tier 1 capital of the bank, ING Vysya Bank said. The Capital Adequacy Ratio (CAR) of the bank, which stood at 12.5% as at 30th June will increase to 14.6%, with Tier 1 CAR at 9.6%, it added. The book value post the issue will stand at Rs173.

Sebi rejects plea to ease QIP pricing norms

After the initial wave, Qualified Institutional Placements (QIP) are expected to pause as the capital market regulator has rejected proposals made by investment bankers to relax the pricing formula for such issues.

In August last year, the Securities and Exchange Board of India (Sebi) had changed the pricing formula, allowing it to be based on the two-week average share price, so that companies could price the issue closer to the market value of the shares. Earlier, the pricing was based on the higher of the six-month or two-week average share price.

But investment bankers last week requested Sebi to alter the formula and take the current market price as the base, as the two-week average price worked out to be higher than the current market price in case of most companies. Investors to the QIPs have thus been demanding a steep discount to the current market price.

However, senior Sebi officials say the regulator has turned down the proposal on ground that the Indian market is still not prepared for such flexibility in pricing. The logic of the Sebi formula is to prevent companies from issuing shares at a discount to friendly investors.

Last week, the pricing formula forced GMR Infrastructure to scrap its $500 million QIP issue after cutting the amount sought by 80 per cent. With the stock prices of many other aspirants also falling significantly in the last one week, experts said the QIP rush would have to take a long pause.

At least 40 QIP aspirants such as Parsvnath Developers, JSW Steel and Lanco Infrastructure will have to either postpone their QIP issues or be satisfied with a much lower price compared to what they would have got before the Budget.

Parsvnath’s stock price has fallen nearly 10 per cent after the Budget, as has JSW’s. Lanco Infratech is down 5 per cent. This is the case for most of the QIP aspirants.

“I think the momentum is clearly shifting from QIP to initial public offers,” Dharmesh Mehta, head of broking at ENAM Securities, said.

In the next few weeks, the market is set to see many high-profile IPOs. Adani Power and NHPC issues of Rs 3,000 crore each will hit the market this month-end and the second week of next month, respectively. Those waiting in the wings include Oil India, MCX and the Bombay Stock Exchange.

via Business Standard

Rush hour on QIP street...GMR falters, others survive

More than half a dozen Indian companies announced plans to sell shares to institutional investors through the QIP route, with only GMR Infra failing to successfully close the issue and had to eventually withdraw the offer. Bajaj Hindusthan Ltd. announced that its Board decided to close the issue and also approved the issuance of 35,450,000 shares of Re1 each at Rs204 a piece, aggregating to an issue size of around Rs7.23bn equivalent to around US$150mn. The issue was priced marginally higher than the SEBI-determined floor price of Rs203 a share. The development came a day after the Bangalore-based GMR Infrastructure called off its QIP of US$500mn, citing adverse market conditions.

Hindalco Industries announced that its Board had approved a QIP issue to eligible investors up to amount not exceeding US$500mn equivalent to Rs24bn. GVK Power & Infrastructure Ltd. raised US$150mn from selling shares to institutional investors. The shares were sold at Rs41.35 apiece. Emami mopped up Rs3.1bn through its QIP. The company issued around 10,000,000 shares of Rs2 each at Rs310 per share to qualified institutional buyers. Hindustan Construction Co. (HCC) said that it will raise over Rs4.8bn through private placement of shares to institutional investors at Rs102.15 a piece.

Housing Development & Infrastructure Ltd (HDIL) raised Rs16.88bn from a clutch of global investors such as KKR, Blackstone, Fidelity in a qualified institutional placement (QIP) of its shares. HDIL became the latest realty company to tap the QIP route for funds. So far, Unitech, which has raised funds through QIP twice, Indiabulls Real Estate, Sobha Developers, among others have raised Rs76bn in the last three months.


A representative claiming to be from KKR has left a comment

I am writing to you on behalf of Kohlberg, Kravis & Roberts (KKR) regarding your post titled 'Rush hour on QIP street...GMR falters, others survive.' The story reports that a number of investors including KKR have acquired stakes in HDIL through their recent QIP issue.

This is factually incorrect -- KKR was not involved in this transaction and holds no investment in HDIL.

We’d greatly appreciate if you could remove any reference to KKR from the post immediately.

Many thanks for your kind attention.

Regards,

Rohan Cornelio

FIIs take a hard knock

Foreign institutional investors which subscribed a major share of the qualified institutional placement (QIP) issues, mainly from infrastructure and real estate firms, have taken a hard knock in the recent market correction.

Since the opening up of qualified institutional placement (QIP) route, 19 companies have used this route to raise about Rs 4,500 crore in the last six months. Of these, 12 are trading below their issue prices. Among them, eight are currently trading at prices 20-45% lower than the issue prices. On an aggregate basis, the current market value of the stocks is around 15-16% lower than the invested amount.

The FII had shown heavy appetite for these stocks, since infrastructure and real estate companies were the toast of the market some six months back. But they were the worst sufferers in the correction which unfolded in the last three months.

The institutions also paid heavily for their faith in a host of other mid-cap stocks offered through the QIP route. After the reversals in the market, a number of companies which were planning similar issues have shelved their plans.

Ansal Infrastructure, now ruling at around Rs 548, is going at 47% lower than the issue price of Rs 1,005. The issue had raised a whopping Rs 678 crore just three months back. The other two real estate stocks - Gesco Corp and Peninsula Land - are also faring poorly in the market. While Gesco Corp, which had raised Rs 480 crore at a price of Rs 800 per share, now commands a market price of Rs 620 (a fall of 21%), the Peninsula Land stock now trades at 30% lower. IVRCL Infrastructure is another stock which has taken a beating. It trades at around Rs 270, 27% lower than the issue price of Rs 370.

Apart from real estate and infrastructure sectors, several other mid-cap stocks issued through this route suffered heavy erosion in shareholder values. The shares of Mcleod Russel, Bombay Rayon Fashions and S. Kumar Nationwide are trading at prices 20-50% lower compared to the QIP price. The exceptions where QIP subscribers have notched up healthy notional profits are Emco Ltd, Deccan Chronicle and Kalpataru Power Transmission. These stocks are currently trading 16-50% above the issue price.