Posts Tagged ‘Indian Corporates’

Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

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Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

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Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

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In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

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Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

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2009 was the year of the QIPs.

QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs.

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QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

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Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

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Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

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QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

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In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

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According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

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Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

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Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

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“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

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QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

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🙂

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QIPs account for 60% of funds raised by India Inc

Qualified Institutional Placements (QIP) contrib-uted Rs 6 out of every Rs 10 raised by Indian companies from domestic sources in January-November 2009. Simply put, Indian companies raised Rs 47,419 crore from domestic sources in the 11 months of this year with QIP funds accounting for Rs 28,726 crore (about 60 per cent).


In the same 11 months of 2008, India Inc raised Rs 2,104 by means of QIPs out of the total Rs 48,807 crore garnered from domestic so-urces, shows a study by New Delhi-based SMC Capitals. This means that in 2009 QIPs account for more than half of total funds raised. Just to put the things in perspective, QIPs am-ounted for only 4.3 per cent of the funds raised during January to November 2008. This underlines the kind of domination QIPs have sho-wn in 2009; and QIPs have truly come to the rescue of cash-starved Indian corporates, said Jagannadham Thun-uguntla, Equity Head at SMC Capitals.

The funds raised thro-ugh IPOs as a percentage of total funds raised through domestic sources is to the tune of 31.7 per cent during January-November, at Rs 15,043 crore compared to that in January-November 2008, which was 34.8 per cent at Rs 16,995 crore, supported heavily by the Reliance Po-wer mega IPO of 2008. The funds mopped up from ADRs/GDRs have jumped up by more than 29 times from $0.1 billion in January to November 2008 to $ 3.15 billion in January to November 2009.

Points to Remember while Selling Stocks – Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series”. 🙂


Points to remember while selling stock

Points to remember while selling stock

 

Buying a stock is simple, but Selling is actually harder as it requires regulation, understandable thoughts, and a tight rein on one’s emotions.

The ongoing optimism, slow economic revival, positive signs on the global front and high expectations from the stable government at home have forced bulls to give up their lethargic activities and to march northward.

Many investors who had seen the value of their stocks hit rock bottom and are now facing dilemma whether to sell or should they hold on? :O

Investors often face problems to take right decisions in volatile market as markets could head either way.

Wouldn’t it be disheartening if the markets rallied northwards, the day after you sold your stocks?

What if the markets come crashing down tomorrow, depriving you of the opportunity to enhance profits?

So, the decision to sell is critical.

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Some of the points when to sell your stocks:

Prima facie, if there is any drastic change in fundamental of a company, this should be the only reason to sell stock.

But a depth research has to be done before taking any decision.

Changes includes;

-restructuring of its business model,

-different business focus and directions.

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FIRST THREE POINTS :

1. Margins Crashed

Margins are the profit that a company makes on its sales.

Rising gross margins tell us that a company is reducing production costs or raising prices.

Conversely, deteriorating margins say either that production costs are increasing and the company can’t raise prices proportionally or that the company is cutting prices in an attempt to maintain marketshare.

If there are expenses related to a new product’s introduction then margins might fall for inoffensive reasons.

Falling margins, either gross or operating, often signal a declining competitive position. Thus it’s important to check both.

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2.Is There Any Drastic Change In Company’s Management?

If people in top management of the company say director or president who are liable for a company’s success begin to go away, there might be a few negative implications for the future outlook of that company as an investor.

You must look into and find out the root cause and also to see how much it could impact you.

If negative prospects, investor should sell the stock and should relocate the funds into a similar company that has stronger and more constant management.

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3. What First Fascinated You To The Stock, No Longer Applies

For example, let’s suppose that you bought a stock of a health care company because of its innovative products in the pharmaceutical field and all of a sudden, it loses a crucial patent for a life-saving medicine.

This may result in a decrease of market share in its industry, which might lead to a reduction in future profits (resulting in a decline in the value of its stock).

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Stay Tuned for more on this where we would touch upon other major points needed to keep in mind by investors before making any Buy and sell decision.

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Indian corporates use downturn to reduce costs

The global crisis changed the growth oriented goals of Indian businesses while there was a focus on operational effectiveness to ensure survival and companies undertook measures to achieve this as per a Price water house Coopers survey, Beyond the Downturn.
Indian corporates use downturn to reduce costs
However, India Inc. seems to have mitigated the impact of the meltdown on their businesses with over 91% respondents executing vital cost reduction and 70% reviewing operational/working capital cycle.

Moreover, India Inc. is bullish about its prospects and is beginning to assay growth again with the economy appearing to be on a path to recovery.

Meanwhile, it is said that survey respondents ranked cash flow management, difficulty in forecasting results and maintaining employee morale during the downturn as key constraining factors.

Further, majority of the survey respondents identified benefit from achieving increased operational effectiveness by following cost reduction, reduction in working capital and optimization of supply chain as a significant opportunity resulting from the downturn.

On the other hand, strong domestic economy, stable banking and financial system and timely government intervention were seen as key factors responsible for the less impact of the downturn on India.

Additionally, 99% of respondents viewed growing demand/volumes as their key recovery expectation with new hiring/ capacity addition getting the second priority.

Corporate India Mobilized Rs 21k crore through Share Sale :)

India Inc has mobilised over Rs 21,000 crore through share sale to institutional investors in the past six months

India Inc has mobilised over Rs 21,000 crore through share sale to institutional investors in the past six months

India Inc has mobilized over Rs 21,000 crore through share sale to institutional investors in the past six months, which is nearly half the amount proposed to be raised by these companies.

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According to data compiled by SMC Capital, during the period starting March 2009, Indian corporates raised about Rs 21,377 crore through 29 Qualified Institutional Placement (QIP) issuances.

“The companies are preparing for a second round of institutional placement.

The firms which have not raised the amount they had proposed initially is most likely to launch another QIP issue,” SMC Capital Equity Head Jagannadham Thunuguntla said.

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Despite the fact that Indian corporates were quite aggressive in QIP fund raising in the past six months, on an average they raised only 48.63 per cent of the amount approved by their board or shareholders, he said.

Early this year, India Inc announced intentions for raising funds through QIP, as all possible sources of fund raising dried up.

Of the total fund raised thorough the QIP route in the past six months, over Rs 10,300 crore, comprising nearly half of the total amount raised, has been mobilised by the cash-starved real estate companies, including DLF, Unitech and Indiabulls Real estate.

44,000 Crores to be Raised by Indian Firms :)

Indian-corporates-raise-44k crores

Indian corporates raised Rs 21,691 crore through the qualified institutional placement (QIP) route during the first half of this fiscal and the funds raised through this route are expected to double in the second half.

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Mr Jagannadham Thunuguntla, the equity head of SMC Capital, said: “As of now, about 48 companies have received requisite resolutions from either shareholders or their boards to raise the funds through QIP route. The total amount proposed to be raised by these companies is about Rs 44,000 crore.”

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He further said: “As there is no requirement for the approval of the Securities and Exchange Board of India (Sebi) for the QIP issuance. These companies are ready to offer their QIP whenever they are confident about the market conditions.”

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“Some of the prominent names of the corporates that would be raising funds through this route include Tech Mahindra, Essar Oil, Hindalco, RCom, Omaxe, Pantaloon Retail, Jet Airways, Ansal, JSW Steel and L&T,” he said.

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It seems that the Indian promoters have regained their confidence and enthusiasm for fund raising, he added.

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It is turning out that corporates are raising funds through QIP route as a last alternative and not as a preference.

Most of the IPOs launched in the last seven to eight months had put up a flop show.

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The bank funds that are another source of funding are not available for most of the corporates.

Depending upon the sector and profile, banks are asking for premium over interest rates and for smaller companies, banks are not offering loans.

So the corporates that are looking for the expansions would opt for the QIP route to raise the funds, Mr Thunuguntla added.

🙂

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Indian Corporates Pitched For a Cut in Interest Rates :)

Softer Interest Rate Regime

Stating that it was essential to maintain the growth momentum, India Inc described 6.8% rise in July industrial output as “evidence of recovery and pitched for a cut in interest rate.

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However, although performance in July has been lower than the previous month, vigorous increase in mining and manufacturing has kept up the level of industrial growth at a reasonable level of 6.8%.

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Additionally, it is said that the industrial economy is passing through a very important stage and FICCI has as a result advocated the need for a softer interest rate regime to assist the overall growth process and promote investments.

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“Although performance in July has been somewhat lower than the previous month…nevertheless robust growth in mining and manufacturing have kept up the level of industrial growth at a reasonable level of 6.8 per cent,” Ficci Secretary General Amit Mitra said in a statement.

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On the other hand, the RBI had cut reverse repo and repo rate by 25 basis points each in April whereas in June, the factory production was revised to 8.2% against 7.8% anticipated provisionally.

Moreover, Assocham stated that in future, the force of stimulus packages would also add on to the revival and India could move on to a close to 6.5% of GDP in the present financial year.

🙂

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