IPO's bleeding red – When will it end?

June 27, 2011   ·   0 Comments

Majority of the IPOs that we have seen lately remain deeply mired in the red, much below the IPO price. The major difference which we see between India and the rest of Asia is that here despite the poor fundamentals, the IPO prices defy all logic and they also ‘manage’ to get fully subscribed and then listed at a premium. Everything is well ‘managed’.

www.stockssavvy.comWithdrawal of issues happen here too where IPOs have got the SEBI nod but due to the market conditions just dit not go ahead with the fund raising plans. Jindal Power, Avantha Power, Lavasa, Micromax, Reliance Infratel, MCX, Lodha Developers, Glenmark Generics and not to mention the bevy of big ticket IPOs of PSUs; all have postponed their issues, waiitng for market conditions to improve. In Dec 2008, SEBI extended the validity of its approval to one year. But many companies who had got the approval for the IPO have missed the deadline and many more are set to miss it too. All these will necessarily have to now refile their RHPs and seek approval all over again.

What the primary market currently requires is one right priced, good, fundamentally strong issue. And what we are getting right now is the exact opposite – grossly overpriced, poor quality issues which are operator driven.  But there is one good news on the horizon – the proposed IPO of Tata Autocomp Systems, the auto part maker from the house of Tatas. News is that it is likely to launch its IPO in the coming two-three weeks. It filed its DRHP with SEBi in Jan 2011 for a Rs.750 crore IPO. This is first time a Tata group company is coming up with an IPO since TCS got listed in 2004. And if that issue does manage to get listed well, it is sure to rejuvenate the primary market. Coming with a pedigree like the Tata, the issue is sure to evince phenomenal interest. And that is what is we need for the primary market right now – one solid issue. PSU IPOs are also attractive but somehow a Tata name evokes a different kind of euphoria. That could be the issue which might help breathe life back.

IPO of L&T Finance which was scheduled for this month has now been postponed. Maybe the success of one issue is all that is required and we could probably see the others rushing in.

Grey Market Premium for IPO’s

Company Name Offer Price 

(Rs.)

Premium 

(Rs.)

Kostak 

(Rs. 2 Lac

Application)

Vaswani Ind. 49 4 to 6
Birla Pacific Medspa 10 to 11 Discount
Rushil Decor 63 to 72 2.50 to 3
Ready Made Steel 90 to 108 5 to 7 2200 to 2400

Shri Ram Transport Finance Co. Ltd. NCD Bond Premium

Offer Price 

(Rs.)

Premium 

Price

Kostak 

(Rs. 1 Lac

Application)

Kostak 

(Rs. 5 Lac

Application)

Without  

Interest

1000 

(Min. Application

10 NCDs x 1000 = 10000)

Rs. 7/- 1700 to 1800 9000 to 9200 2100

IPO Subscriptions

Birla Pacific Medspa IPO Subscribed

20-6-2011 21-6-2011 22-6-2011 23-6-2011
QIB 0.33 0.67 0.99 1.04
HNI 0.00 0.00 0.00 0.17
Retail 0.25 0.37 0.58 1.82
Average 0.25 0.46 0.70 1.18

Rushil Decor Ltd. IPO Subscribed

20-6-2011 21-6-2011 22-6-2011 23-6-2011
QIB 0.00 0.23 0.23 0.23
HNI 0.00 0.00 0.00 1.35
Retail 1.52 1.75 2.12 6.57
Average 0.53 0.73 0.86 2.62

 

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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