BackInfra firms wait and watch before launching QIPs
Of 21 QIPs done since Jan, 8 were by infra firms, and of these, 6 have seen a sharp fall in their share prices
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Mumbai: Infrastructure companies that were looking to raise huge amounts of money through sales to financial investors that are also known as qualified institutional placements (QIPs) may delay their plans after the share prices of some companies that recently sold shares through this route have fallen, said five bankers familiar with the development.
On 16 September, Bloomberg reported that Hindalco Industries Ltd has postponed its share sale programme. The Aditya Birla Group company was looking to raise ₹ 5,000 crore through its QIP. A Hindalco spokesperson declined to comment on the story.
Other infrastructure companies, whose bankers have decided to wait include Hindustan Construction Co. Ltd (HCC), GVK Power and Infrastructure Ltd and IL&FS Transportation Networks Ltd.
“The response during the roadshow was that HCC should wait for markets to improve. It was looking to launch its sale in end-September, but it does not make any sense. It would rather launch it when the markets are conducive," said one of the bankers familiar with the matter. None of the bankers wanted to be identified. HCC received shareholder approval on 1 August to raise ₹ 750 crore through a QIP.
“HCC’s roadshow is on and it wanted to raise part of the ₹ 750 crore, but will open its books later when investor confidence is higher," added this person.
“HCC has not specified a timeframe for raising capital and therefore there is no deferment. The enabling board resolution allows the company to explore suitable opportunities on an ongoing basis to decide the best option," the company’s spokesperson said in an email.
GVK, which has a presence in airports, roads, energy, hospitality and the life sciences sector, was looking to raise ₹ 1,500 crore through its share sale programme in September as reported by Mint on 17 July. In an email response, GVK said: “We do not comment on market speculation."
IL&FS Transport Networks, a unit of Infrastructure Leasing and Financial Services Ltd (IL&FS) and one of the largest BOT (build-operate-transfer) road asset owners in India, had taken approval to raise ₹ 1,000 crore through a QIP.
“The company had taken an enabling resolution to raise up to ₹ 1,000 crore through QIP and/or corporate bond (CB) in August. The enabling resolution is valid for a year. Beyond this, as a board policy, I am not in a position to comment on any market speculation on the subject," said Mukund Sapre, executive director, IL&FS Transportation Networks.
“While infrastructure firms are ready for QIPs, they want to hold back their plans for now. The QIPs that hit the market have not performed well. And the recent cancellation of coal blocks has also caused companies to rethink their plans," said a second banker. This person pitched for the mandate for the IL&FS Transport QIP.
“There is no way infrastructure companies can come and raise large (amounts of) capital now. Stock prices of those companies that have raised capital have crashed. On average, they are trading 20% below their listing price. Most of the infrastructure companies were looking to raise further capital, but they will have to launch multiple small-size QIPs to do this if this situation continues," added a third banker.
Of the 21 QIPs done since January, eight were by infrastructure companies, and of these, six have seen a sharp fall in their share prices.
The share prices of infrastructure companies such as GMR Infrastructure Ltd, Aban Offshore Ltd, Jaiprakash Associates Ltd, Reliance Communications Ltd and KSK Energy Ventures Ltd have seen a drop of 12.8% or more since their respective share sale programmes.
Jaiprakash Associates saw the largest fall in its stock price since its QIP issuance at ₹ 70 a piece. Its share price has fallen 62.6% to close at ₹ 26.20 a piece on BSE on Monday. GMR Infra is trading 42.34% below its QIP issuance price of ₹ 32 per share.
The share prices of Gammon Infrastructure Projects Ltd and J Kumar Infraprojects Ltd have remained almost flat.
The share price of ITD Cementation India Ltd has risen 24% from its QIP price to close at ₹ 446.45 apiece on Monday.
IDFC Ltd is another exception; its shares are up 2.6% from the QIP issuance price.
On 10 September, IDFC raised ₹ 1,000 crore through a QIP, the biggest this month. It was compelled to do so to reduce the holdings of foreign institutional investors to 49% before it establishes a bank. Its shares are up in anticipation of the creation of the bank, for which the infrastructure finance company has received the permission of the Reserve Bank of India.
Companies in other businesses remain largely unaffected as far as appetite for their QIPs is concerned, said an expert.
Infrastructure firms sold shares in an attempt to reduce the debt on their books, but their stocks haven’t done well since, said Ashutosh Maheshvari, managing director and chief executive officer at Motilal Oswal Investment Advisors Pvt. Ltd. “However, market conditions for QIPs other than (by companies in) the infrastructure sector are pretty attractive."
pooja.s1@livemint.com
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