Falling stocks hit QIP investors

Falling stocks hit QIP investors
Business Standard, Money & Markets, Section II, Page 1

BS Reporter / Mumbai

Qualified institutional buyers (QIBs), which recently invested in placements of companies, have suffered serious losses due to thek recent slide in stock markets.

Sample this: The stock price of Network 18 has slipped 23.58 per cent since its institutional placement. Similarly, Bajaj Hindusthan, HDIL, Unitech, Dewan Housing, GVK Power & Infrastructure and Shobha Developers were all down between 4 per cent and 18 per cent.

Since the beginning of the year, 15 companies have raised Rs 24,800 crore through qualified institutional placements (QIPs). And there are over 30 other companies, who have received their shareholders' nod for such issues. These include Pantaloon Retail, JSW Steel, IndusInd Bank and S Kumars. Educomp raised Rs 607 crore via private placement on Thursday.

In the last two weeks, the stock markets have been rather volatile with a downward bias. Market experts said that this could lead to a falling enthusiasm for QIPs. This is because the price will have to be the average of the last fifteen days' stock price, according to the Securities and Exchange Board of India's (Sebi) guidelines.

"The rush for QIPs could slow down as the losses incurred on recent QIPs would discourage institutional players," said Ashwin Parekh, partner, Ernst & Young.

However, all of them have not suffered so badly. QIPs done in April and May have done quite well. While the stock price of Unitech is down 13.78 per cent compared with the price of its recent placement, but investors in the earlier one in April saw returns of 80.13 per cent.

Similarly, investors in DLF's promoter stake sale would have benefited by almost 21.17 per cent. And Power Trading Corporation and Emami (issue on July 2) returned 14.40 per cent and 12.71 per cent, respectively. Market players said that some of this sharp fall in prices could be attributed to offloading by institutional players which were allotted shares earlier. Since QIPs are mostly sold at a discount and do not have a lock-in period, investors have the option of selling off. And the March to mid-June would have been a good period to offload these stakes for a profit. But the sharp drop in the market has ensured that the many institutions with recent allotment of shares were unable to exit.