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Journalism of Courage
If You have invested in the initial public offers (IPOs) launched in 2004, here is some bad news: Your wealth in many key scrips has not only declined below the offer price following Friday’s massive crash but also the shares are available in abundance in the secondary markets.
Today’s selling avalanche deluged almost all companies which came out with IPOs with huge premiums in 2004 — taking advantage of an unprecedented bull phase in the Indian stock markets. Almost 17 companies have raised close to Rs 19,611 crore from the primary markets in the first four months of 2004. Of this, government-owned ONGC was the biggest of all which raised Rs 10,654 crore at an offer price of Rs 750 a share. On Friday, it closed at Rs 722.
Similarly, ICICI Bank was down to Rs 265 as against its offer price of Rs 280. IBP, now set for a merger with Indian Oil, crashed from Rs 620 to Rs 453. But some other companies like Biocon and Dishman continued to remain in positive side with high valuations.
In this kind of market, investors will not be inclined to invest in primary markets, say analysts. ‘‘The markets have crashed essentially due to the slightly unclear direction about the economic reforms under the new government. We have to wait till the Cabinet is decided and what statements comes from New Delhi during the weekend,’’ says V. Krishnamurthy, Managing Director of JM Mutual Fund.
The market crash, say analysts, can also cloud the new offerings which are currently in the pipeline. NTPC, Tata Consultancy and a host of banks were planning to hit the markets in the months to come. ‘‘If the market crashes further many of the companies may not get the valuations which they had expected. We may see some IPOs getting delayed — albeit temporarily,’’ says Sanjay Prakash, CEO of HSBC Mutual Fund.
On the other hand, small investors are now wondering what to do with their holdings. ‘‘I was investing in IPOs and even received allotment in Patni and ONGC. Now I am wondering whether to sell or stay invested?’’ asks Jeetraj Shah, a Mumbai-based small investor.
‘‘Small investors with a long-term view should hang in there and may use this opportunity to buy more shares,’’ advises Prakash. ‘‘But those with short-term view they should get out of the markets immediately,’’ he adds.
