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BW Businessworld

Volatile Markets Trip QIPs Run

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A few days — good days, that is — can make a lot of difference. On 10 July, 10 of the 13 qualified institutional investor placements (QIP), totalling Rs 12,500 crore, by the companies in the accompanying table were trading at less than the price at which they had been offered and sold. On 14 July, the number of companies trading at below the QIP issue prices went down to seven. There are another 20 companies seeking to make QIPs totalling Rs 36,550 crore for which the appropriate approvals have been received.

The largest of these issues is for Rs 9,000 crore by Essar Oil, followed by JSW Steel for Rs 5,000 crore. Other notables include Reliance Communications, Pantaloon Retail and Parsvanath Developers, to mention three. But sadly for these companies, investors have remained rather cool to these offers; the markets continue to rise, but as a Crisil Equities report on QIPs points out, nothing fundamental has changed in these companies.

It will take more than buoyant markets to attract investors to QIPs. Even at these levels, the markets are believed to be overvalued. "The S&P CNX Fifty (more popularly known as the Nifty Fifty) is trading at a slightly expensive 15 times FY10 earnings," says Chetan Majithia, head of Crisil Equities. QIPs are no longer quick institutional placements.

(This story was published in Businessworld Issue Dated 27-07-2009)

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