Newly listed ICE cos fall below offer prices

MUMBAI, MAY 6: As many as 18 ICE infotech, communication and entertainment companies listed on stock exchange during the past one year h...

MUMBAI, MAY 6: As many as 18 ICE infotech, communication and entertainment companies listed on stock exchange during the past one year have shed upto 85 per cent of their stock values. Importantly, five software companies are now trading below their offer prices and six are trading close to their IPO prices. SQL Star International, Integrated Hitech, Kale Consultants, Visesh Infosystems, Melstar Information and Pentagon Global are also trading close to their offer prices.

Around 23 IT and media companies have been listed on the BSE and other stock exchanges during the past one year and almost every stock has fallen by more than 42 per cent from its peak level since listing. This is certainly no good news for primary market investors. In fact, several software and media companies who have plans to tap the market are already started postponing their issues, according to market sources. Merchant bankers are also advising these companies not to go ahead with their IPO plans. As many as 100 companies were earlier planning to raise Rs 5,000 crore from the market.

Merchant bankers seem to be right. Consider this: KPIT Systems, Zenith Infotech, Telesys Software, Shree Rama Multitech and Cinevista Communications are all trading below their IPO prices. The trouble begins from this point as investors have been investing in IT IPOs from all and sundry, lured by the high premiums on their listing. KPIT Systems, which came out with an IPO at Rs 90, is now trading at Rs 77.4, fell from a peak of Rs 504. Zenith Infotech is another instance which came out with an IPO at Rs 110 is today traded at Rs 82, fell from a peak of Rs 418. Shree Rama Multitech and Cinevista Communications have disappointed investors. As investors paid a substantial premium to corner few shares of these companies 8211; the former charged a premium of Rs 110 and the later Rs 290 8211; they are now suffering several crores of capital erosion.

As IT and media stocks were going through the roof on the secondary market, most of the companies from these sectors had been listed at an eye-brow raising premium to their offer price. But the current trend should worry so many investors who have been blindly putting money, for both short-term and long-term gains, in IT IPOs.

Although some investors may be really smart to book their short-term gains, those investors who had invested for long-term gains as well as those who had entered in these counters at higher levels may now find themselves in a piquant situation. Notwithstanding that the market was bullish on Thursday, recently listed Cinevista fell by Rs 7 to close the day at Rs 293. The company had offered 19 lakh equity shares of Rs 10 each through the book-building route and 6.33 lakh shares offered at a fixed price of Rs 300. The IPO had received overwhelming response from investors and had been oversubscribed 200 times.

Several media and IT companies have lined up issues. Padmalaya Telefilms, Pritish Nandy Communication, Devgan Enterprises and Tapassum International are low priced issues. Sun TV, NDTV, Sagar Enterprises, UTV, Nimbus and Sony Entertainment Corp are also planning to tap the market, which are expected to be high premium issues. Mascot Systems8217;s IPO fixed price portion which closed for subscription on May 4 is believed to have just sailed through. Five companies are coming out with IPOs this month. A few more are also expected to hit the market in May.

SoftSol India8217;s Rs 34.12 crore IPO is already open for public subscription. The company is offering 14.35 lakh shares at a premium of 85 per share. IPO is closing for subscription on May 8. Rajesh Global Solutions is offering 25 lakh shares of Rs 10 each par. The issue opens on May 8 and closes on May 10. Balwas eCom India, which was established recently, is going public with its Rs 3.5 crore IPO at par. The issue opens on May 15 and closes on May 20. Computer Power India is offering as many as 2 crore shares of Rs 1 each at par, aggregating Rs 2 crore. Computer Power8217;s IPO opens on May 8 and closes on May 11. Southern Online Services IPO opened on May 5 and closes on May 9. Action Microtek, Binary Semantics, Computech, Datamatics, Infrasoft, Microland, Microworld, Planetasia, Radiant Infocom, Shonkh Technologies, SRA Systems, Wintech and Zensar are expected to be high premium issues. Mega Channel, which was established in 1996, is also offering 38.3 lakh shares of Rs 10 each at a premium of Rs 8,aggregating Rs 6.89 crore.