Fund raising through QIP issue hits three year high

Meanwhile, shares of eight out of nine companies are currently trading below their QIP price on the BSE.

The fund mobilization by Indian companies through QIP (Qualified Institutional Placement) has touched three year high despite volatile market conditions.

In first eight months between January and August of the current calendar year 2013, as many as 20 companies has raised about Rs 12,354 crore through QIP.

The amount raised through QIP till August 2013 has already surpassed the total QIP fund raising of Rs 8,969 crore in the year 2012 through 47 issuances. In 2011, total 9 companies had raised Rs 3,459 crore via QIP.

While, in 2009, around 45 firms had raised a record Rs 32,631 crore, followed by Rs 28,339 crore raised by as many as 53 companies in 2010, according to data released by SMC Global Securities.

QIP is a capital raising tool whereby a listed firm can issue equity shares to institutional investors.

As the market condition has been sluggish since June 2013 due to various domestic and international issues, the fund raising through QIPs has slowed down in the recent months, says Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities Limited.

Thunuguntla however, sees improvement in QIP market in the coming months due to increased fund raising from banks through this route.

As of now government is expected to encourage public sector undertakings (PSU) banks to take the QIP route to raise additional capital. The finance ministry is also likely to allow four other state-run banks, including Syndicate Bank, United Bank of India, and Union Bank of India, to raise capital through the QIP route, he adds.

Meanwhile, the QIP investors have seen a substantial market value erosion of these companies as most the shares are currently trading below their issue price.

Except PI Industries, which appreciated 34% post QIP offer, the remaining eight companies are available up to 51% below their issue price on the Bombay Stock Exchange (BSE).

Jaiprakash Associates and JP Power Ventures are trading lower by 52% and 41% respectively against their issue price. Axis Bank, Den Networks and Chola Investments are available at 22-27% below their QIP price.