QIP shares jump 23%, IPOs lag

Investors who bought shares in the primary market through qualified institutional placements (QIPs) have reason to celebrate as their money in 50 QIPs has grown 23 per cent in 2009. On the contrary, investments in initial public offers (IPOs) during the period have come down 3 per cent. It means that Rs 37,040 crore of investments in 50 QIPs have risen by Rs 8,545 crore, while IPOs saw a value erosion of Rs 268 crore.

However, the aggregate picture could be misleading. The shares of 32 companies offering QIPs are currently trading at a premium, while 18 are available at a discount to the offer price. Also, of the 50 issues, 26 shares outperformed the Sensex. While for IPOs, only 7 of the 17 new issues outperformed the benchmark index.

Sarabjit Kour Nangra, vice-president (research) with Angle Research, said, “The majority of recent IPOs have been priced aggressively, leaving little for investors, which has resulted in most of these issues faring poorly after listing.”

According to a market analyst, “The QIP route helps an institutional investor get the shares of a company at a discount to the market price, and it also helps them save on the transaction cost. Since there was no lock-in period, returns were higher.”

“Most of these companies raise money through QIP to repay debt and fund capital expansion. It looks attractive after declining sharply from their peaks during the global meltdown, and it was also one of the reasons for the success of QIPs,” he added.

Of the 50 companies that raised money through QIPs, investors in forty-five companies acquired shares at a discount to the prevailing market price. According to Sebi rule, the QIP price will be two-week average market price.

In 14 QIP issues, institutional investors saw a value appreciation of more than 30 per cent, in nine issues their market wealth increased 10-30 per cent.