Investors who subscribed to qualified institutional placement (QIP) issues have recorded a handsome return due to a run-up in market price of the stocks. A sharp recovery in equity markets has seen 9 out of 12 companies that raised money via the QIP route in past six months (since August 2019) outperforms the market by surging up to 34 per cent against their issue price. YES Bank (down 55 per cent), RBL Bank (down 3 per cent) and Prestige Estates Projects (down 0.04 per cent) are the only three counters to trade below their respective QIP price.

These 12 companies had collectively raised around Rs 49,000 crore via the QIP route, which is currently valued 17 per cent higher at Rs 57,353 crore. In comparison, the S&P BSE Sensex recorded an average return of 3.3 per cent.

The S&P BSE Smallcap index (up 24 per cent) and S&P BSE Midcap (up 23 per cent) have rallied more than 20 per cent from their lows on August 23, 2019. In comparison, the S&P BSE Sensex was up 13 per cent during the same period.

Total seven companies including Avenue Supermarts, Bajaj Finance, Shree Cement, PVR, Axis Bank, Varun Beverages and Bharti Airtel were up in the range of 17 per cent to 34 per cent to their QIP price.

“Some of these stocks are trading at a premium valuation. That said, the cost of servicing the funds / money raised via QIP is quite low when the going is good. In some cases, there is no other alternative for raising funds as the business operations may not be on a strong footing. Successfully performing companies, on the other hand, have done well by lapping up financial resources through QIPs at the peak of their valuations in the markets,” explains G Chokkalingam, Founder and CIO at Equinomics Research.

A number of these companies, analysts say, comprise the mid-and small-cap segment that has done well in the past few months. If they are to be believed, there is more headroom for stocks in these two segments.

“Nifty Midcap and Small-cap indices have been relatively outperforming since calendar year 2020 (CY20) beginning. Going ahead, we expect both indices to see acceleration in relative outperformance in the coming weeks. Currently, both indices have bounced after retracing 61.8 per cent of mid-January up move. The secondary corrective phase has helped indices to undergo healthy consolidation paving the way for next leg of up move,” wrote analysts at ICICI Securities in a recent report.

New high

Meanwhile, the fund raising via the QIP route is likely to touch an all-time high during the current financial year 2019-20 (FY20). Thus far in financial year 2019-20 (FY20), 13 companies have raised around Rs 51,118 crore via QIP route. Fundraising via this route had hit a record high back in FY18, with 51 companies raising Rs 57,524 crore during the fiscal, according to PRIME Database.

Private sector lender YES Bank has on Saturday said it has received shareholders' nod to raise capital up to Rs 10,000 crore via issuance of equity shares or other convertible securities. Torrent Pharmaceuticals, Piramal Enterprises, Adani Power, Adani Transmission and Adani Enterprises are among those have passed a Board resolution to raise up to Rs 7,000 crore each via the QIP route, shows data.

Going ahead, Chokkalingam expects more companies, especially from the top 250 stocks (in terms of market-cap) to join the race to accumulate financial resources through QIPs, as the kind of valuation they enjoy in the secondary market is at a record high level for most.