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MARKETS / Out of 34 IPOs, 26 closed below issue price

Investors in IPOs lose Rs 5,000 cr

New Delhi, PTI:

Primary market investors have lost more than Rs 5,000 crore with shares of
most of companies, which came out with initial public issue since January,
trading at a discount.

“Out of 34 IPOs issued this calendar year, 26 of them closed below their issue price last
week. These IPOs have raised Rs 16,920 crore but the current value stands at Rs 11,562
crore. So they are suffering a loss of 31.67 per cent,” said NEXGEN Capitals Limited
Equity Head Jagannadham Thunuguntla.

He said five companies which include JSW Energy, RNS Infrastructure, Ybrant
Technologies, Elysium Pharma and Kamayani Patients Care, with the proposed issue of
more than Rs 4,000 crore, withdrew their IPOs prior to Sebi approval.

Trading low

In 2008, 20 companies did not tap the primary market despite approval from Sebi due to
uncertainty in the markets. Shares of eight out of ten companies which got listed on stock
markets during second quarter of the current fiscal (July-September) following the IPO are
trading below the issue price.

According to NSE data, the shares of only Vishal Information Technologies and Austral
Coke and Projects are at 100 per cent and 30 per cent premium respectively, while the
equity of remaining companies are being traded at discount.

The shares of companies (listed during second quarter) which are trading below the issue
prices include Resurgere Mines and Minerals, Nu Tek India, Birla Cotsyn India, KSK
Energy, Lotus Eye Care, First Winner Industries, Archidply Industries and Sejal
Architectural Glass. Vishal Information Technologies closed at Rs 306 last week, an over
100 per cent premium to its issue price of Rs 150.

It was listed on August 11 with the issue size of 27.9 lakh shares on the NSE at a discount
of 13.33 per cent. The company is a IT-enabled services and solutions firm and its IPO
received subscription by 1.2 times. Similarly, Austral Coke and Projects Limited (IPO
subscribed by 1.65 times on the whole), was listed on September 4 with a 5 per cent
premium to its issue price of Rs 196. While, the scrip settled with a premium of 30 per
cent at Rs 252 on the NSE last week.

Analysts believe that these two IPOs were listed underpriced as the markets were in the
bear grip since the beginning of the calendar year 2008. So after their listing, price
appreciation was witnessed in these stocks. But stock speculation cannot be completely
denied.

“These IPOs were offered at lower prices. So, they have managed to gain the investors’
confidence as they are available at attractive valuations, “said Prithvi Haldea, Managing
Director of Prime Database. “But the possibility of stock manipulation cannot be ruled
out,” he added.