With two medium- to large-sized issues cutting their IPO (initial public offering) prices by 10-20 per cent, the downturn in secondary markets is now visibly seeping into the primary market. While construction and real estate major Emaar MGF lowered its price band to Rs 540-630 from its earlier price band of Rs 610-690 (a fall of 9-11 per cent), healthcare company Wockhardt Hospitals slashed its issue price from Rs 280-310 to Rs 225-260 (a fall of 16-20 per cent).With this, the post-listing market capitalisation that Emaar was eyeing has come down by Rs 5,915 crore to Rs 62,111 crore at the higher end of the price band. Similarly, the market capitalisation of Wockhardt is down Rs 521 crore to Rs 2,711 crore. The IPO of Wockhardt opened today, while Emaar opens on February 1.The volatility in the secondary market over the past nine trading sessions holds the key to this correction. According to an investment banker of an issue open for subscription, “The prices are being revised because of the unexpected response to other issues that were open for subscription. It’s purely external factors that are impacting the enthusiasm and nothing related to the company.”Strong are these external factors. The Sensex is down 7.2 per cent or 1,365 points since January 18. This market behaviour under the influence of global factors followed by liquidity squeeze by the mega issue of Reliance Power and squaring up off the domestic open interest positions is now impacting the IPO market.The IPOs that opened for subscription in the past week to 10 days have received poor subscription response. Shriram EPC that closes for subscription on February 1, has got a total subscription of 2.17 times by January 31, but only 7 per cent of its retail portion has been subscribed.Similarly, Bang Overseas that closed for subscription today got subscribed only 1.24 times while its retail portion barely managed to scrape through with a subscription level of 1.17 times. On the same lines, Cords Cable, which closed for subscription on January 24, and was a relatively smaller issue of Rs 40.5 crore, got subscribed five times (that’s small oversubscription for a small issue). KNR Constructions, that closed on January 29, was subscribed 1.25 times, with retail subscription of just 61 per cent; the company has fixed the issue price at Rs 170, the lower end of its band.Meanwhile, IRB Infrastructure Developers, that opened for subscription today, has managed a subscription of 0.44 times; but its retail portion got subscribed by 0.3 per cent. “We have already opened for subscription and will not go for a revision in prices,” said Virendra D Mhaiskar, chairman and managing director of IRB Infrastructure. “Extending the issue closing date will depend on the subscription levels though I feel we are comfortably placed.”
