IPOs146; dismal run continues

Mindtree Consulting, which offered its shares at Rs 425 per share, closed at Rs 620.30, giving a good premium of 46 per cent to investors on the listing day

Mindtree Consulting, which offered its shares at Rs 425 per share, closed at Rs 620.30, giving a good premium of 46 per cent to investors on the listing day on Wednesday. This, however, provided only a small relief to the battered investors in initial public offerings IPOs.

Investors, who had put their money in three other IPOs, were disappointed on Monday as their share prices made a poor debut, ensuring that they suffer huge losses. Broadcast Initiatives, which came out with an IPO at Rs 120 per share, closed at Rs 69.40, a discount of 42 per cent on the listing day. In simple terms, an investor who bought 10 shares is facing a loss of Rs 505 on his original investment of Rs 1,200. Evinix Accessories is also in the same boat. The company, which offered its shares at Rs 120 per share, closed at Rs 73.75 on the first day, a 39 per cent loss for investors. Similarly, Oriental Trimex suffered a capital erosion of 39 per cent as its shares closed at Rs 29.45 as against the IPO offer price of Rs 48.

Figures show that all is not well on the IPO front. As many as 33 companies have been listed on the bourses since December 11, 2006. Of these, share prices of 24 companies are now trading at a discount to their offer IPO offer prices.

8220;You can8217;t blame this poor performance on the stock market fall alone. Overpricing is definitely an issue. Some of the companies have overpriced their issues. Those companies, which are unable to justify their high prices, will find their shares drifting below the offer prices,8221; said BSE dealer Pawan Dharnidharka.

The last two months have disappointed IPO investors. Cairn India, which came out with a mega IPO, is now quoting at Rs 115 against the offer price of Rs 160. House of Perals which offered shares at Rs 550 is now quoted at Rs 334, a dicount of 39.2 per cent.

Even real estate shares are no exception. Akruti Nirman shares are now quoting at Rs 372 as against the offer price of Rs 540. Shobha Developers, too, has also fallen below the offer price of Rs 640. However, companies like PFC and Global Broadcast are quoting at a premium to their IPO prices.

As IPOs are launched through the book-building route, pricing is supposed to be fool-proof. Institutional investors, who get a sizeable quota in an IPO, put money after thoroughly studying the fundamentals of the company. There could be overpricing in some of the cases, say merchant bankers.

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The poor performance of IPOs on the bourses has coincided with the Securities and Exchange Board of India Sebi investigation into post-IPO manipulation involving some companies. Sebi had banned promoters and associates of Atlanta Ltd from dealing in the capital market for price manipulation and violation of listing norms. In another instance, Sebi had directed the exchanges to withhold the profits earned by 40 individuals and entities during the listing of Nissan Copper Ltd.