On June 22, Info Edge’s board of directors approved raising of funds by the way of Qualified Institutional Placement (QIP).
On 5th August, 2020-Info Edge the parent company of Naukri.com, 99acres.com, jeevansathi.com, shiksha.com, zomato.com, PolicyBazar.com, etc. announced the issue of $250 million QIP shares to raise up to Rs 1,875 crore from Qualified Institutional buyers.
At the BSE, stocks of the aforementioned parent company gained 7% (Rs. 3419 per share) after the launch of share sales were declared.
Info Edge is one of the best branch out electronic and internet based franchise with strong performance and capital distribution reputation owned and managed by Sanjeev Bikhchandani, an Indian Businessman and Entrepreneur.
However, during the Covid-19 lockdown most of the business and online websites owned by him i.e. Info Edge are going through drought and economic recovery. During the months April-June the functioning of the business were shut.
Naukri.com (employment) and 99Acres.com (real estate) witnessed greater loss compared to portals – Jeevansathi (matrimony) and Shiksha (education) in the past months.
What Is a Qualified Institutional Placement (QIP) shares sale?
Common public cannot be a part of this share sale as it these shares are issued directly without legal frameworks or market disclosure. Qualified institutional buyers (QIBs) are the only individuals allowed to purchase QIP shares.
The Securities and Exchange Board of India (SEBI) created this type of security to avoid the dependence on foreign capital resources and let the capital circulate in our domestic economy. QIP shares are issued commonly in India and other Southeast Asian countries.
Why only Qualified Institutional Buyers (QIBs) have access to Qualified Institutional Placements (QIPs)?
The only members eligible to purchase QIPs are qualified institutional buyers (QIBs)- accredited investors- as defined by particular securities and exchange governing body presiding over them.
This restriction is based on the observation that QIBs are institutions with monetary expertise and financial power that marks them capable to weigh and partake in capital markets at a higher level.
On the other pointer, Public Offers (PO) has to go through many legal frameworks and authoritative permission from various boards and control panels. Unlike shares issued to public, QIPs save time in their initial stage of issuing shares and the access to capital is far quicker. The reason being- QIPs have fewer legal rules and regulations to follow, making them much more cost-efficient and time-proficient as well.
In comparison to funding from foreign bodies, there are less legal fees and there is no cost of listing overseas. Before the introduction QIP by SEBI, there was a growing concern from Indian supervisory body that domestic corporations were gaining access to international capital funding easily rather than Indian-based capital sources. Specialists proposed the QIP strategies to encourage Indian companies to raise funds domestically instead of digging into global external markets.
Info Edge will raise Rs. 1875 Crores from qualified institutional buyers: Sanjeev Bikhchandani (Info Edge Founder)
Info Edge India Limited has sanctioned to raise Rs.1875 crores through QIP sale of shares.
This lump sum amount will be raised as a part of Info Edge’s growth strategy and to boost the long-term resources of the company. The enterprise would issue, offer and allot these equity shares at face value (FV) of Rs. 10 per share.
According to Bombay stock exchange (BSE) reports, ‘Info Edge’s fundraising committee has authorized the opening of the QIP with the floor price of Rs. 3,177.18 per equity share.’ The company, at its preference has offered discounting of shares up to 5% on the floor price i.e. on the share amount and not the number of shares in the Qualified Institutional Placements.
This declaration has prompted a 7% sudden rise in Info Edge stock as compared to a day before. It was trading at Rs.3200 per share at the closure of the market yesterday. It has climbed up to Rs. 3,378 per share at the time of the news breakout and as we report this it is still gradually soaring higher.
“I think with Chinese investments being constrained I do believe we will get enough inorganic opportunities to expand and if we see a good one we’d like to be prepared and ready for it. We are expecting some of these in the months ahead.” – Sanjeev Bhikchandani.
Waves of Corona Virus on Indian companies like Info Edge:
In the year 2020, Indian institutions – Kotak Mahindra Bank, JM Financial, PI Industries, Axis Bank and Info Edge have raised nearly Rs 30,500 crore through QIP. Axis Bank launched Rs 10,000 crore QIP this week. Info Edge who also has stake in Kotak Mahindra Bank mentioned above was among the firms of India who were adversely affected by the coronavirus pandemic and lockdown.
As we report this issue, HDFC has announced the launch of 1400 crores worth QIP. Seems like the financial market will be dominated by the QIPs this year thanks to SEBI for introducing this strategy that allows companies to raise funds for themselves in a safe and national environment.
Info Edge’s Naukri.com was affected by unemployment due to the lockdown as companies were no longer hiring employees. Rather they were laying off people for cost cutting. Naukri.com also faces tough competition from other portals like Internshala and LinkedIn.
99Acres.com the rental portal for buying selling real estate properties has been seeing no customers for the past few months. Everybody is at the safety of their previously acquired homes. Nobody is now looking for investment in real estate as health and education sectors followed by the food industry has gained priority.
Info Edge’s Jeevansathi.com has accounted for less than 10% of the company’s revenue during lockdown 2020. With restrictions on large public gatherings, new marriages have been postponed for future. With 2020 being regarded as an unfortunate year, Indian want to stay clear of the bad times and not form new relations as per their beliefs.
Shiksha.com also one of the children of Info Edge has been affected by the delay in the exams and admission process of schools and colleges being an educational website for search of careers and universities both national and international.
One might think- the companies are raising money to recover their loss. However, it is to be noted that buyers may not risk buying shares of a loss making company. This is can be attributed as a growth strategy to meet certain capital requirements in order to grow and to get ahead in the intensely competitive race. The success of the QIP funds are based on what the money raised will be used for by the company that has issued them. Economist have derived that there won’t be any direct impact on our Indian economy but indirect benefits can be availed for example if Info Edge utilises the money to provide employment opportunities then economy will see positive growth through their site Naukri.com but if the unemployment is not under their control then the fund utilisation will be undisclosed for now.