After impressive listing, many of the past initial public offerings (IPOs) have turned out to be big flops, causing a major loss to investor wealth during the current slump in the market. Out of 142 IPOs listed since January 2006, as many as 61 are quoting at a discount to offer price.
Merchant bankers say the meltdown in new listings will bring the issue of overpricing to the fore and may prompt companies either to reasonably price their offers or to wait till market conditions turn positive.
Some of biggest losers among high-priced IPOs are House of Pearl Fashions, Uttam Sugar, C & C Constructions and SMS Pharma. Their shares are currently quoting at a discount of 27-76% to the respective offer prices.
An ET analysis showed that of the 61 laggards, 12 are trading at a discount of 50% or above, 27 between 20-50% and the remaining 22 between 1-20%. Cairn is one high-profile IPO which could not attract investor fancy, post-listing. At the current price of Rs 138.2, the scrip is quoting at a discount of 14% to the offer price.
From its peak of 15795 on July 24, the Sensex has tumbled 9% to close at 14358 on Thursday amid global crash triggered by sub-prime concerns. New-issue investors have been major victims of the downturn as the fall in many IPOs has been much sharper than the loss in the Sensex. A few IPOs, in fact, have been quoting under the offer price for a long time, shows the trend.
For instance, Uttam Sugar Mills was listed at Rs 380 on April 10, '06, at a 12% premium to the offer price of Rs 340 per share. While the scrip gained further ground to scale the peak of Rs 480.5 on May 10, '06, it, however, kept falling subsequently till it touched a low of Rs 78.2 on Friday.
Investors in House of Pearl Fashions have so far not come across any opportunity to exit the stock with some gains, as the share price never rose beyond the offer price of Rs 550. Listed at Rs 469 on February 15, '07, the scrip has constantly been in decline till it touched a low of Rs 251 on August 7, '07. At Thursday's close of Rs 273.5, the stock is quoting at a discount of 50%.
"The sharp decline in new listings can be blamed on aggressive pricing of IPOs and bad market conditions. A lot of unreasonable exuberance was evident in many issues, which was also responsible for the current turmoil," said a stock broker.
Given unfavourable market conditions, funds-seeking companies may have to go slow on their IPO plans to avoid the risk of meeting with poor response from the public, according to merchant bankers. However, a few like Motilal Oswal Securities are learnt to be going ahead with the IPO plan despite hyper volatility in the market.
Merchant bankers say the meltdown in new listings will bring the issue of overpricing to the fore and may prompt companies either to reasonably price their offers or to wait till market conditions turn positive.
Some of biggest losers among high-priced IPOs are House of Pearl Fashions, Uttam Sugar, C & C Constructions and SMS Pharma. Their shares are currently quoting at a discount of 27-76% to the respective offer prices.
An ET analysis showed that of the 61 laggards, 12 are trading at a discount of 50% or above, 27 between 20-50% and the remaining 22 between 1-20%. Cairn is one high-profile IPO which could not attract investor fancy, post-listing. At the current price of Rs 138.2, the scrip is quoting at a discount of 14% to the offer price.
From its peak of 15795 on July 24, the Sensex has tumbled 9% to close at 14358 on Thursday amid global crash triggered by sub-prime concerns. New-issue investors have been major victims of the downturn as the fall in many IPOs has been much sharper than the loss in the Sensex. A few IPOs, in fact, have been quoting under the offer price for a long time, shows the trend.
For instance, Uttam Sugar Mills was listed at Rs 380 on April 10, '06, at a 12% premium to the offer price of Rs 340 per share. While the scrip gained further ground to scale the peak of Rs 480.5 on May 10, '06, it, however, kept falling subsequently till it touched a low of Rs 78.2 on Friday.
Investors in House of Pearl Fashions have so far not come across any opportunity to exit the stock with some gains, as the share price never rose beyond the offer price of Rs 550. Listed at Rs 469 on February 15, '07, the scrip has constantly been in decline till it touched a low of Rs 251 on August 7, '07. At Thursday's close of Rs 273.5, the stock is quoting at a discount of 50%.
"The sharp decline in new listings can be blamed on aggressive pricing of IPOs and bad market conditions. A lot of unreasonable exuberance was evident in many issues, which was also responsible for the current turmoil," said a stock broker.
Given unfavourable market conditions, funds-seeking companies may have to go slow on their IPO plans to avoid the risk of meeting with poor response from the public, according to merchant bankers. However, a few like Motilal Oswal Securities are learnt to be going ahead with the IPO plan despite hyper volatility in the market.
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