Saturday August 16, 03:12 AM
Spate of QIP issues likely as Sebi revises pricing formula
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A revision in the pricing formula announced by Sebi is expected to result in a spate of private placement issues in the coming months, according to investment bankers. A large number of Qualified Institutional Placements (issue of shares by listed companies to qualified institutional buyers like banks, insurance companies, mutual funds and foreign funds) could not go through over the last few months due to the 'peculiar pricing' formula prescribed for such issues. As per the earlier formula, the floor price for QIPs will be the average price of the company shares during the two weeks or six weeks preceding the relevant date whichever was higher. According to investment bankers, due to the sharp fall in share prices over the last few months, the floor price arrived at using the earlier formula would work out to be higher than the prevailing market price. In other words, the shares of these companies were available in the market at a lesser price compared to the price arrived at by the earlier formula and thus there were no buyers for these issues. As per estimates, about 50 odd issues seeking to raise about Rs 25,000 crore through the QIP route were in the pipeline and waiting for the market regulator to revise the pricing formula. Sebi declared a new formula after a board meeting early this week under which floor price for QIPs will be average of the two weeks price preceding the relevant date. With the change in the formula, the QIP market is now expected to pick up again. As per estimates, there were 36 QIPs that raised about Rs 25,000 crore last fiscal. However, there was practically no QIP over the last few months. —PTI
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