PIPE investments in listed firms suffer $2.24 bn loss

Written by Markets Bureau | Mumbai | Updated: Dec 28 2008, 03:40am hrs
The crestfallen stock market and the negative sentiment have dented the private equity investments. The PIPE or private investment in public equity deals have seen an erosion of $2.24 billion in 2008 and qualified institutional placement (QIP) deals have seen an erosion of around $2.35 billion.

According to a study carried out by SMC Global Securities, the overall poor condition has seen the mark-to-market losses swell in 2008. Of the total PIPE deals in 2008 was $5.29 billion, the current mark-to-market values has slid to $3.05 billion.

It was observed that around 92% of the PIPE deals done in 2007 have turned negative thanks to the buoyant market in 2007 which saw valuations soar. And this was immediately followed by a tremendous slide.

Out of the total 63 deals, as many as 56 have turned negative and only five deals or 8% are positive. The five deals that registered positive gains include three from banking and financial services sector, one from telecom and one from manufacturing sector.

In 2008, the fund raising activity through the QIP route has reduced to $0.53 billion as against $5 deals that were closed in 2007, representing an 86% drop. There have been only four deals in 2008 as compared to 29 deals that were cut in 2007.

The total volume raised through QIPs from 2006 till date aggregated to $6.59 billion. The current mark-to-market value of the same has fallen to $2.31 billion representing current return of -65%.

In the QIP zone, real estate deals have caused the highest amount of pain as values have diminished by 86% the engineering and construction comes a close second with a 76% value dip, the report says.

Companies like Ansal, GMR, Phoenix Mills, Peninsula Land, Mahindra Lifespaces, Suzlon are amongst the biggest losers in terms of the mark-to-market value erosion.