After steadily retreating from the
Indian markets until the beginning of this year, the Foreign Institutional Investors (FIIs) were
again seen making a big leap of faith on the Indian markets. They were seen
actively investing in the Indian companies through the Qualified
Institutional Placement (QIP) route. The domestic institutional investors have also
been exhibiting their interest in this route. The renewed interests by the
institutional investors have been reflected in Unitech's successful raising of funds
in two rounds to the tune of Rs 4,410 cr this year through this route even in
the drying equity markets. Similarly, Indiabulls also successfully raised
Rs 2,656 cr through this route. QIPs have recently become the
popular means to raise funds by the public listed companies. According to the
data from the Prime Database, a Delhi-based research firm, nearly 10
companies raised Rs 11,259 cr through this route out of the total Rs 11,714 cr
raised in 2009, which works out to 96% of the total money raised. Altogether 14
QIPs hit the market in 2009 and have planned to raise nearly Rs 40,000
cr through this route in this year. The database also lists another 50 QIPs in
the pipeline to raise over Rs 60,000 cr.
Analysts say that a host of factors has prompted companies to issue
QIPs and also attracted many institutional investors to invest through this
route. However, the recent volatility in the
Indian equity markets has led to many QIPs trading in the red. Since the
beginning of July, QIPs are down in their values, and Crisil estimates that 9 out
of 14 QIPs done in 2009 are ruling below their issue prices, and the
mark-to-market losses for the QIP buyers, including foreign and domestic
institutions, are estimated at nearly Rs 1,000 cr. Rising concerns over QIP
valuations and their oversupply, coupled with investor fatigue and SEBI's stance
towards the fixation of floor price, are creating problems to QIP issuers.
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