Posts Tagged ‘institutional investors’

JSW Energy IPO Receives Tepid Response

The Rs 2,700-crore initial public offering

of JSW Energy got subscribed a modest 1.67 times on the final day of issue today, reflecting muted investor sentiment amid poor performance by other power sector majors in the bourses.

The IPO of JSW Energy received bids for over 38 crore shares, against 22.76 crore shares on offer, garnering a demand of 1.67 times the shares on offer, as per data available on the National Stock Exchange.

Analysts said the weak response of retail investors in the issue shows that investors prefer to stay away from the power sector.

“The memories of recent power IPO listing debacle is still fresh in the mind of investors. It was mainly IPO financing based demand as only institutional investors are participating who mainly brings in borrowed money,” SMC Capitals Equity Head Jagannadham Thunuguntla said.

The portion reserved for qualified institutional buyers got subscribed 2.88 times, while the high networth individuals bid for 0.74 per cent of the shares on offer. Retail investors portion remained got subscribed 0.17 per cent.

“Most of the power sector stocks are trading about 20-30 per cent below issue price. JSW Enery is likely to witness lukewarm debut on the bourses on the day of listing as the actual price discovery is yet to happen,” Thunuguntla added.

Current Fiscal Witnessed Fund Raising of $16.7 Billion

The first eight months of the current fiscal witnessed fund raising of $16.7 billion (Rs 78,000 crore) through equity issues by India Inc due to the returning of the foreign investors and resuming of expansion activities by the companies.

However, the amount raised so far in this fiscal is still far below as compared to the corresponding period of 2007-08, a year that witnessed a boom for the stock markets. India Inc had raised Rs 125,526 crore for the period between April and November 2007.

The overall fund-raising through equity and equity convertible financial instruments in the period between April-November 2009 was backed by an increase in the overseas issues and a rush by the companies to issue fresh shares to institutional investors through qualified institutional placement (QIP).

The total funds raised through overseas issues, including equity and equity convertible bonds in the first eight months of the current fiscal stood at Rs 27,745 crore across 28 issues as against Rs 945 crore reported during the whole of 2008-09, data compiled by Prime Database show.

However, during the same period, QIP issues also touched an all-time high with firms across sectors raising Rs 31,292 crore as compared to Rs 188 crore reported during FY09. This surge in QIPs is linked to the rise in stock market valuations as institutional investors flush with liquidity returned to fund expansions and new ventures of companies.

The fund-raising by companies coming through public issues also surged eight times to Rs 15,981 crore through 16 initial public offer (IPO). However, despite a revival in the capital market, the IPO market has not taken off in direct proportion to the revival in the capital market, which was witnessed in 2007-08. So far this fiscal there have been 19 IPOs while the same was at 67 in 07-08.

Over 100 companies raised Rs 83,000 crore by issuing debt instruments like bonds and debentures during H1 of the current fiscal. However, on a period-on-period basis, the April-September period saw funds raised to the tune of Rs 83,961 crore, an increase of 25% over Rs 67,108 crore mobilized in the corresponding period of the previous year.

Meanwhile, the funds were raised by issuing through private placement debt instruments, including bonds, debentures and securitized papers, which have a tenor and put or call option of more than one year.

SEBI’s Auction Move on FPOs Impresses Marketmen :)


SEBI's Auction Move on FPOs Impresses Marketmen

SEBI's Auction Move on FPOs Impresses Marketmen

SEBI’s has planned to remove the cap price for the follow-on public offerings and this idea seems to be impressing market players.

SEBI has said that  it would introduce “pure auction as an additional book building mechanism for institutional investors for follow-on public offerings (FPOs).”

Analysts and market men feel that this is going to generate loads of excitement and fun for market players, as those investors who are convinced about a particular issue will invest at a higher price to seek allotment and those not-so-convinced can invest at a lower price.

Merchant bankers said it will be interesting to see how this will work as there are a few PSU FPOs likely to hit the market soon.


PSUs likely to come out with FPOs include NMDC, MMTC, Neyveli Lignite Corporation, Rashtriya Chemicals and Fertilizers, National Fertilizers, Coal India and Engineers India

As of now, the IPO price is determined through a price band (which has a lower and upper level).

An auction or floor price is the minimum price at which bids can be made for an IPO.


Meanwhile, merchant bankers welcomed SEBI’s announcement on Monday that exchanges could have a separate platform for Small and Medium Enterprises (SME).


As the primary market size grows, the smaller companies are getting lost amid the big ticket IPOs.
Having such exclusive guidelines for SMEs is definitely a good idea, said merchant bankers.

SME platform SEBI on the lines of the AIM on the London Stock Exchange will be better.

Those SMEs with a paid-up capital of between Rs 10 crore and Rs 25 crore have an option of either being on the SME exchange or the main bourses.


According to the new guidelines, SMEs should have a maximum paid up capital of Rs 25 crore for listing.

For an investor the minimum application size in an SME IPO will now be Rs 1 lakh.

Though such a limit might seem like it will prevent the retail investor of small means from investing in SME IPOs, merchant bankers said that it is a good move.

“This will allow retail investors to take more informed decisions. It will protect these investors as the chances of manipulation with respect to smaller companies are much higher. Those investors with the right amount of knowledge and liquidity will be the ones investing in these IPOs,” said Mr Jagannadham Thunuguntla, Head of Equity at SMC Capital.

Having the merchant bankers underwriting the IPO will make sure that they price the issue properly and also provide proper valuations.

Merchant bankers are also happy that for an SME issue the minimum number of investors is only 50 for a particular issue.

“For an issue, as of now, there has to be a minimum of 1,000 investors,” said Mr Thunuguntla.

Record Fund Raising by India Inc,through QIPs, is on the Cards.


Record Fund Raising by India Inc,through QIPs, is on the Cards

Record Fund Raising by India Inc,through QIPs, is on the Cards



Indian companies are all set to  raise record fund through share sales to institutional investors in the next few months as they attempt to reduce debt accumulated during their takeovers.

Hindalco, Aban Offshore and Tech Mahindra, which bought the scandal-hit Satyam Computer, will lead this record fund raising by India Inc.

Indian companies have approvals from shareholders to raise as much as Rs 68,000 crore by selling shares to institutional investors under the so-called qualified institutional placement route.

This is in addition to around Rs 26,000 cr that has been raised by companies such as real estate developer Unitech and Suzlon Energy in the last six months, thanks to the signs of economic revival and  record stocks rally.

India Inc raised as much as Rs 26,430 cr in the last thirty-six QIP issues since March this year, according to the analysis.

These companies which raised funds in the last six months still have room to raise another Rs 23,000 cr based on the approvals shareholders have given them.

There are several companies which have received approval for QIPs between June and October with a potential to raise as much as Rs 44,000 crore, but are yet to hit the market.

Hindalco, which is saddled with debt after it acquired Canada’s Novellis, plans to raise Rs 2,900 crore and Tech Mahindra plans to raise to partly repay the loan it took to buy Satyam Computer.

Essar Oil which is negotiating to buy Shell’s refineries in the UK plans to raise around Rs 9,000 cr, whereas JSW Steel has a mandate raise Rs 4,853 cr.

Shareholders’ approval is valid for a year and most of these companies took approval after June this year.

“The issues that have come till now got strong interest from institutional investors, and predominantly from foreign buyers who bought over 90% of the QIP issues.  Given the current market conditions and the kind of interest that Investors displayed in the Indian growth story, the proposed issues should be subscribed successfully,” said Jagannadham Thunuguntla, equity head, SMC Capitals.

The fund raising gets bigger when one takes into account the potential IPOs and government share sales which may run into billions of dollars more.



In India, PE & VC Funds Turn Selective :)

PE and VC funds in India have tightened their purse strings.

PE and VC funds in India have tightened their purse strings.

Private equity (PE) and venture capital (VC) funds in India have tightened their purse strings.

That’s because limited partners (LPs) —the main source of funding for venture capitalists —are reducing their exposure in this space.

According to industry estimates, there has been a drop in new investments to the tune of 71% during the first nine months of 2009 as compared to the same period last year.


Industry experts say limited partners are miffed with the returns shown by the general partners, who manage the fund and its operations on a daily basis.

Many LPs are looking at better returns and shorter investment term cycles, instead.

LPs have instructed some of their funds to conserve cash and value in the existing portfolio. Some limited partners are not investing in private equity funds on an incremental basis.

This assumes significance in the current context because it’s tough to raise fresh funds, and the competition to attract limited partners to VCs is quite intense.

A venture capital firm is usually structured in the form of a limited liability partnership and people who invest in it are limited partners.

In India, the bulk of venture capital inflow is from Foreign markets like the US and Europe, with limited partners mostly being institutional investors such as pension funds and insurance companies and family offices who are mostly based out of the US.


Indian venture funds are also in place, many of which tap money from overseas by means of an offshore fund.

With new funds not in sight, private equity and venture capital firms are also becoming selective.


Are Retail Investors Staging a Comeback in Country’s Primary Market ?

Are Retail Investors Staging a Comeback in Country's Primary Market ?

Are Retail Investors Staging a Comeback in Country's Primary Market ?

In what could be viewed as a sign of revival of retail interest in the country’s primary market, the initial public offering of Indiabulls Power has received over 31,000 applications from retail investors on the first day of its issue.


Although the retail portion of the offering remained under subscribed, the interest was more than what was seen in three major IPOs of the fiscal — NHPC, Oil India and Adani Power.

According to an analysis, NHPC‘s over Rs 6,000 crore issue received 30,474 retail applications on the first day.

Adani Power‘s Rs 3,610 crore issue got only 15,000 such applications.

The Rs 4,982 crore issue of OIL received 7,700 applications.


“Retail investors are gradually staging a comeback and it is a pleasant surprise for the primary market,” SMC Capital Equity Head Jagannadham Thunuguntla said.

The Rs 1,700-crore initial public offer of Indiabulls Power, which hit the market yesterday, got subscribed nearly six times, as flooded the counter with maximum number of bids.

However, bids from retail investors on the first day of subscription accounted for only 37 per cent of the shares reserved for them.


India’s United Spirits to Sell New Shares to Cut its Debt :)

India's United Spirits set to sell new shares to institutions to help cut its debt

India's United Spirits set to sell new shares to institutions to help cut its debt

India’s United Spirits is set to sell new shares worth about $300-350 million to institutions to help cut its debt, after efforts to sell a stake to private equity firms and Diageo failed.

The world’s third-largest spirits maker by volume is set to place the shares with institutions (QIPs) as early as this week, three sources with direct knowledge of the deal said.

“The market is good enough for a share sale. Why opt for a PE firm that buys at the same price and adds little value otherwise,” one source said.

United Spirits has debt of 65 billion rupees ($1.4 billion), which it took partly to fund the acquisition of scotch whisky maker Whyte & Mackay, and has said it aims to cut this to 40 billion rupees by the end of March 2010.

Chairman Mallya said in early September he planned to cut the firm’s debt by end October.


In June, United Spirits sold treasury stock, carried on its books from past mergers and acquisitions, at an average 900 rupees a share to raise about $186 million, which it used to repay some of its loans.


It still has over 8 million shares of treasury stock which it can sell or issue fresh ones.

Sources said United Spirits would opt for the latter. It got shareholders approval last month to raise up to $350 million.


“Private equity investments through preferential allotment have a lock-in of one year, there’s more due-diligence involved and they also look for board seats,” said Jagannadham Thunuguntla, equity head of investment bank SMC Capitals.

“Institutional investors coming through the QIP route have no such hassles, it is also faster,” he added.

United Spirits’ loss-making group firm and airline operator Kingfisher Airlines which is also looking to raise funds, could be a possible factor in PE firms being hesitant to invest in the company.

United Spirits has pledged shares to secure loans for Kingfisher Airlines.


Valuation, a major reason for the break-down of talks between it and Diageo is another factor to watch out for as its margins come under pressure from a rise in molasses prices due to the poor sugarcane crop, analysts said.

Shares of United Spirits, valued at $2.1 billion, have risen just 3.3 percent so far this year compared to a 76 percent rise in the main index.


PE Funds Raising Plummets to Lowest Levels Since 2003

Private equity fund raising plummets to lowest levels since 2003

Private equity fund raising plummets to lowest levels since 2003

Fund raising by global private equity funds has dipped to an over five-year low of $38 billion in the third quarter of 2009, as fund managers are refraining from making any new commitments before next year.


Fund raising in Q3 of 2009 represents a 55% slump from Q2 of 2009, when the PE funds had raised an aggregate $84 billion globally, according to latest report by a reputed global research firm Preqin.

Private equity fund raising plummets to lowest levels since 2003, with the third quarter figures equivalent to just 45% of the $84 billion raised in Q2 2009.

Many of the funds that are closing are doing so short of target, and a number of fund managers putting their fund raising efforts on hold until 2010, or abandoning them altogether for the foreseeable future.


However, the report noted that the investment shift from the private equity asset class is only short term and the institutional investors would pull back again in the final quarter of this year and in 2010.


Over the year the number and aggregate fund raising target has dropped considerably.

Reasons can be the slowdown in launches of fund raising programmes, plus an increase in the number of funds being abandoned.

Institutional investors are not making new commitments at anything close to the rate they were in previous years.

The rate of fund raising to drop by nearly 70% over the course of a year is a dramatic fall and demonstrates just how challenging it has become to raise new funds in the current scenario.


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.


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.


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.

Gold Touches a New High of Rs 16,220 per 10 gram !


Due to the speedy buying by stockists in advance of the festival season, in the midst of the global rates climbing to an 18-month high of $ 1,018.15 an ounce, GOLD rose by Rs 250 to touch a new high of Rs 16,220 per 10 gram in the gold market.


However, it is said that after the metal in London increased to an 18-month high, the buying action gathered momentum as stockists indulged in buying gold.


While, the concern was that a global economic revival may strengthen inflation in the midst of a weak dollar, enhancing demand for the metal as an alternative investment.

On the other hand, gold in overseas markets advanced 10.60 dollar, or 1.1%, to 1,018.15 dollar an ounce whereas silver coins also touched a record high of Rs 31,800 per 100 pieces.


Further, standard gold and ornaments spurted by Rs 250 each to Rs 16,220 and Rs 16,070 per 10 gram, respectively.

On the other side, sovereign increased by Rs  50 to Rs 12,950 per piece of 8 gram.


Marketmen said the precious metal might see new peaks in the coming days once the festival and marriage season starts on September 19.

Current upsurge maybe purely out of reason of stockists buying as retailers refrained from buying gold during ‘Sharaadh’, the ongoing inauspicious fortnight in Hindu mythology.


According to analysts, gold may climb a high level of $1,100 an ounce in the overseas market in the next six months.

Silver ready shot up by Rs 700 to Rs 26,600 per kg and weekly-based delivery by Rs 910 to Rs 27,570 per kg.


Silver coins rose to an all-time high by gaining Rs 200 to Rs 31,700 for buying and Rs 31,800 for selling of 100 pieces.


However in between due to the increasing investment demand with the commencement of festival and marriage season, gold imports observed a huge rise during August at 21.8 tonnes as compared to the previous month where the import of the precious metal was 7.8 tonnes this year.

This shows that India’s gold imports have trebled in a gap of one month.