The great IPO bazaar

With Initial Public Offerings (IPOs) worth Rs 15,000 crore slated to hit the Indian capital market in the coming year, it is time for the investors to take some precautions. The TV Today issue is already over and thanks to a bullish market, the scrip is trading at a considerable premium. The next big ticket IPO is by Patni Computers Systems (PCS). The IT company is one of the oldest in the country and has NR Narayana Murthy as a previous employee, as its claim to fame. PCS may make its investors happy in the short term, as it is offering shares with Rs 2 face value at a price band of Rs 200 to Rs 230. Among the present generation of IT companies, PCS is a well-known name. The only corporate governance issue with it has been allotting bonus, or rather, free shares, worth Rs 850 crore (calculated at Rs 230 band) to itself, just prior to the issue. It would serve PCS well to learn issues of corporate governance at the feet of its ex-employee Murthy.

As the floodgates to the IPOs open, investors must beware. Do not be taken in by the hype surrounding any issue or company. The history of capital markets has shown that any hyped issue fails to deliver goods to its investors. Remember India’s big IPOs by Essar Oil and MS Shoes? Before investing in any IPO, do some basic research on the company’s promoters and its businesses. Also keep in mind that while investing in shares you are taking a risk. There is no guarantee that your investments have to go up. You are responsible for your money, do not expect the regulators to help you out when the going gets rough.

Swinging with the markets
The stock market has turned volatile and the long awaited correction has set in. Suddenly all those predicting a Sensex of 8000 soon have disappeared, as the market index lurches toward the 5,500 mark. The brokers who have been protesting this newspaper giving sell signals to the investors for the past three weeks have stopped calling! Like we said before: the market is volatile right now, wait for things to stabilise before entering the market. And enter if you can take the risk. To repeat, the India story is good, Moodys has just made India investment grade, bet on it for the long term and don’t get afraid of the short term market swings.