Hype over, IPOs now trade at a discount

Reality check is sinking in after the honeymoon. One in three initial public offers (IPOs) and follow on public offers (FPOs), which have got listed in the past four months, are trading at a discount to their issue price.

Call it the fundamentals playing out after the initial euphoria if you may, but the market has shown a thumbs down to 14 out of the 42 scrips that have got listed after the issue over the past four months.

What's interesting is that the listing fever is as strong as ever — over the period only three out of the 42 public offers listed at a discount to the issue price. These three were Birla Power Solutions, South India Bank and Raj Rayon.

In the recent past, only a handful of the IPOs used to trade at a discount to their issue price. But the past few months have seen a whole pack of underperformers even as the sensex is still riding on the back of strong inflows and good corporate numbers.

The rerating of the stocks by the investors are being reported after the initial hype of the public offers wanes out. Market players say in some cases this reflects the aggressive pricing of the public issue to take advantage of the bullish market scenario.

So in some cases the stocks are listed at a premium to the offer price but later drops down. The stocks which are currently trading at a discount to their offer price include names like Birla Power Solutions, Visa Steel, K Sera Sera Productions, GVK Power Infrastructure, Andhra Bank, Jagran Prakashan, Nitin Spinners, Sakuma Exports, Malu Paper, Raj Rayon, Sri Sakthi Paper, Dynemic Products, Powersoft GSL and R Systems International.

However, the appetite for fresh public offers is far from over. This can be gauged by the other side of the story where a number of stocks have shot up after their IPOs. In some cases the current price is already in multiples of their issue price.

The list of companies, which have given 100% plus returns after the issue, include names like Tantia Constructions, BL Kashyap & Sons, Pratibha Industries, Sadbhav Engineering. Some of the other big gainers include Sun TV, Opto Circuits, Kewal Kiran Clothing, Rohit Ferro Tech, Gallantt Metal, Indo Tech, Inox Leisure and Entertainment Network India.