Did dumb money chase QIPs?

The recent market correction has hit retail investors hard, mainly due to inflated valuations.

Have you seen a 30-40% loss in this downturn? Feel like you could have been more cautious? You're not alone—many institutional investors, often considered "smart money," are in the same boat.

In CY24, 78,679 crores were raised by 54 companies through QIPs. Major offerings included Zomato's 8,500-crore issue, Adani Energy Solutions' 8,373-crore IPO, and others like Prestige Estates and Punjab National Bank.

This nearly 80,000-crore raise now stands at 66,090 crores, reflecting a 16% loss. The situation looks even worse when analyzed at the individual QIP level.

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TOP LOSERS

In CY24, there were 54 QIP issues, with only nine yielding profits for institutional investors. The rest saw losses ranging from 2.8% to 51.8%, averaging 22.2%.

While some institutions may have exited with smaller losses, many held onto their shares. Three QIPs lost over 40%, 11 saw losses between 30% and 40%, 10 had losses of 20% to 30%, and 21 lost less than 20%.

Top most performing QIPS of 2024

When we examine individual QIPs, the biggest losses by both percentage and size are as follows:

• Adani Energy Solutions' 8,373-crore issue lost 23.4%
• Prestige Estates' 5,000-crore issue lost 31.7%
• Samvardhana's mother-son's 4,938-crore issue lost 32.7%
• Adani Enterprises' 4,200-crore issue lost 24.2%
• Sona BLW's 2,400-crore issue lost 25.1%

If we look purely at the percentage of loss, regardless of the size of the QIP, the companies with the biggest percentage losses are:

• Jupiter Wagons: 51.8%
• GPT Infraprojects: 45.1%
• HCC: 40.7%
• Hi-Tech Pipes: 38.6%
• Vishwaraj Sugar Industries: 36.7%

DOUBLE WHAMMY

On a positive note, some QIPs saw impressive gains: 102.7% from Pearl Global, 98.1% from Ami Organics, 65.3% from Lloyds Metals & Energy, and 37.8% from Sky Gold.

Domestic mutual funds played a major role, subscribing to over 40% of the shares in these offerings, putting retail investors at risk through their investments. Life insurance companies also participated.

Many institutions bought into QIPs at triple-digit PE multiples, which contributed to the underperformance of companies like Zodiac Energy (-36.1%), Zaggle (-29.6%), and Adani Energy Solutions (-23.4%).

However, QIPs from companies like Ami Organics and Transformers & Rectifiers performed better, with returns of 98.1% and 26.6%, even at high PE multiples. The sustainability of these valuations remains uncertain amidst global market volatility.

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