Recent IPO Listings - Review

Co. Name	BSE Code	Offer Price	Listing Date	Listing Price
Prakash Constrowell	533605	138	4-10-11	145.00
RDB Rasayans	533608	79	7-10-11	85.00
Tijaria Polypipes	533629	60	14-10-11	62.00
One Life Capital	533632	110	17-10-11	115
Flexituff International	533638	155	19-10-11	155
Taksheel Solutions	533639	150	19-10-11	157.40
M & B Switchgears	533644	186	20-10-11	180.00
Vaswani Industries	533576	39.20	24-10-11	33.45
Indo Thai Securities	533676	74	2-11-11	75.00
MCX	534091	1032	9-3-2012	1387
BCB Fin. (SME Platform)	534109	25	13-3-2012	27.00
Olympic Cards Limited	534190	30	28-3-2012	29.95
NBCC	534309	106	12-4-2012	100.00
M.T. Educare	534312	80	12-4-2012	86.05
Samvardhana Motherson Fin.	--	113 to 118		Withdrawn
Tribhovandas Bhimji Zaveri	534369	120	9-5-2012	115.00
Plastene India Ltd.		81 to 84		Withdrawn
Monarch Health (BSE � SME)	534422	40	30-5-2012	42.00
Speciality Restaurant	534425	150	30-5-2012	153.00

A Bad year for IPOs

Even as late as June this year, investors in initial public offers (IPOs) continued to be better off than those who dabbled in the secondary market. Smaller IPOs continued to deliver good listing gains, even while selecting stocks in the secondary market became a much more difficult proposition.

But the vicious downswing in the market over the past three months has well and truly blown the froth off the IPO market. Not just the new ones, but even ones that were listed over the past year have all plunged below their offer price. Seventy-six of the 83 IPOs that listed between March 2007 and March 2008 are now available below their offer price.

Here are the lessons from those 83 IPOs (recent ones were excluded as the time window would be insufficient to draw conclusions).

Of the total 96 initial public offers in the period, 13 were withdrawn. The remaining 83 IPOs were considered for this analysis. For performance study, price movement from the listing date to October 15 was considered.
Should have sold on first day

One common lesson for investors from IPOs in this period is that, irrespective of the quality of the issuer, you would have fared better had you booked gains on the listing day. Holding these stocks in expectation of better gains in the secondary market would have resulted in sharp erosion in value. Fifty-two of the 83 stocks that debuted in the period closed in the green on listing day. Of these, 22 listed at a price which clocked a 50 per cent gain over their issue price.

However, of the 83 stocks only one (Allied Digital) currently trades at a price higher than its listing price; all others have fallen from their Day One prices. On the other hand, of those that had a bad listing, only three — Koutons Retail, Page Industries and Bang Overseas — made gains in the days following listing. The wait was not worth it for the others.

If stocks gave away much of the gains made on listing, a good number of them also plunged below their issue prices. As many as 76 IPO stocks are trading below their offer price now. When it comes to the extent of losses, the quality of the business didn’t matter much — IPOs from quality businesses, such as BGR Energy, Transformers and Rectifiers and Edelweiss Capital, were among the worst performers — their prices beaten down by over 70 per cent.

The extent of decline in stock prices shows that the pricing for IPOs in a bull market tends to factor in premium valuations and probably assume best scenarios for these businesses, resulting in high downside risk.

Better bet than listed peers

Would investors have been better off picking stocks from the secondary market as compared to the IPO? The answer is still ‘no’. Though IPOs have put up a dismal performance, they have still fared marginally better than peers from the same sector in the secondary market. A study of 30 prominent IPOs in this period suggests that newly listed stocks fared better than their listed peers since their offer date.

Of the 30 IPOs, 18 recorded a lower percentage fall than a listed peer from the same sector, from the time of their offer. In fact, select stocks such as Maytas Infra (up 22 per cent) and Religare Enterprises (up 76 per cent) actually delivered hefty gains from their offer price, even as listed companies from the sector fell sharply. Nagarjuna Construction (down 79 per cent) and Geojit Financial Services (down 47 per cent), loosely comparable to the above, declined sharply over the same period.

But do note that it is only the listing gains that have ensured better performance from the debutants.

Religare Enterprises, a financial services firm focussed on broking services, was sold at Rs 185 in its IPO. But on the day of listing, the stock closed at Rs 525.30, a straight 183 per cent gain. In one year from the month it listed (October 2007), the stock lost nearly 38 per cent, but the gains made on listing are still holding the stock above its issue price. This further supports the logic for selling stocks on the day of listing.

Maytas Infra, Power Grid Corporation, Everonn Systems, Allied Digital Services and ICRA are the other stocks that held on to gains over their offer price, thanks to strong listing performance.

So, if you were to make a decision on the day of the offer, the IPO would have been the better buy. But if you were to look for secondary market options, an older peer would have been a better buy than a newly listed stock.
The subscription figures delude

As in the preceding year, overwhelming response to an IPO was no guarantee of the stock’s performance. Of the IPOs in this period, Everonn Systems was in the top place, over-subscribed 145.5 times, followed by Future Capital (131.79 times), Mundra Port and SEZ (115.32 times) and BGR Energy (115.13 times).

However, from the date of listing to now (October 15), Everonn Systems has fallen by 55 per cent, Future Capital by 77 per cent, Mundra Port and SEZ by 60 per cent and BGR Energy by 81 per cent. The best performing IPO — Allied Digital Services — was subscribed by a little over 59 times and Indian Bank, another good performer, by 32 times.
No sector orientation

Last year’s IPO returns numbers showed a distinct trend, with those from financial services, software and infrastructure faring relatively well. But this year’s performance tally shows no sector-specific trend in the returns. In every sector an equal number of IPOs performed better than their listed peers as those that did worse.

The stocks that topped the listing gains list were Everonn Systems, Vishal Retail, Religare Enterprises, Nitin Fire and Mundra Port, hailing from diverse sectors. But the common thread that ran through them all was the time of their debut.

All these stocks were listed between June and December last year, a period when the Sensex rallied from 14K to 20K levels. And of all the IPOs, only seven are still holding above their issue price — Religare Enterprises, Maytas Infra, Koutons Retail, Everonn Systems, Time Technoplast, ICRA and Page Industries. Again, all of them listed between March and December 2007.

The performance of the IPOs was thus a function of market conditions at the time of the offer, more than company-specific or sector-specific factors. Of the 17 stocks that listed in the choppy markets between January and March this year only Bang Overseas is still in the green (up 54 per cent from the issue price). However, at current levels a few of them are really attractive ‘buys’ — Maytas Infra, Consolidated Construction Consortium, Mundra SEZ, Onmobile Global and MindTree Consultancy. Given the change in the earnings outlook, the ones in the financial sector are better avoided as concerns over the financial turmoil in broader markets persist.

Clearly this has been a bad year for greenhorns, whether they were investors or companies seeking to make a debut in the market!

IPO mayhem

The Indian primary market has virtually dried up as the total value of initial public offering of 2007 has witnessed an erosion of about USD 3.43 billion so far this year, with the media space being worst hit, a latest report says.

The bullish trend in the capital market was see in the IPO volume of 2007, as a record volume of USD 8.18 billion was raised.

However, rough market conditions have resulted in a negative return of about 42 per cent or a value erosion of USD 3.43 billion in absolute terms till October 10, according to a report of Nexgen Capitals, the merchant-banking arm of brokerage firm SMC Global Securities.

"In a bear market fund raising activity becomes very difficult. Excess of bull market last year has resulted in the bear market this year. In a bull market takers for every issue at every level can be found but today's market is a buyers market," Nexgen Capitals Equity Head Jagannadham Thunuguntla said.

In the backdrop of bearish capital market conditions this year, the IPOs of 2007 have reported wealth erosion across the industry segments. "More than 60 per cent of the value is eroded in the industry segments of auto, healthcare, manufacturing, media and real estate," the report added.

"Media was the worst hit space as business in this sector is very difficult to continue, besides this sector has a very long gestation period," Thunuguntla said, adding "when a market falls the capex driven firms such as infrastructure and realty are affected, while media related firms which generally have in-operational cashflows also get negative impact."

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There were 103 IPOs in 2007, out of which 88 representing (85 per cent) were in loss and only 15 in profit.

So far in 2008, IPO volumes have seen substantial drop to USD 4.23 billion, comparison with last year when the IPO volume was as much as USD 8.31 billion, indicating a YoY drop of 47 per cent on annualised basis.

An analysis of various sectors show that media suffered the maximum loss (75.05 per cent), followed by auto (73.70 per cent), healthcare (64.71 per cent), manufacturing (60.70 per cent) and real estate (59.98 per cent).

Meanwhile, BFSI (banking, financial services and insurance) reported a loss of 24.05 per cent in its return, infrastructure (15.56 per cent), IT & ITeS (48.06 per cent), retail (44.41 per cent) and telecom (29.54 per cent).

The report added, "the mark-to-market (MTM) losses of IPOs of 2008 is as high as 59 per cent with a loss of about USD 2.5 billion on absolute basis".

The current MTM losses in the IPOs of 2008 have been experienced across the industry segments. Some of the IPOs which have seen heavy over subscription such as Future Capital, Reliance Power have seen serious value erosion.

So far this year, there were 34 IPOs, of which 29 issues representing 85 per cent of the total volume are in loss, while 5 IPOs amounting to 15 per cent are in profit.

No fun subscribing to IPOs this season..

Investors have lost around quarter of the amount raised by 18 IPOs this calendar year as 13 of them are trading below their issue prices, a top Finance Ministry official said on Saturday.

"Out of the 18 IPOs launched in 2008, 13 were trading at a discount last week implying losses to investors of about a quarter of the total IPO amount. I think, it must be larger today," Finance Secretary D Subbarao said at a seminar on Securities Contracts (Regulation) Rules here.

If the situation continues, it would be increasingly difficult for corporates to raise money from the capital market, he said.

The Finance Secretary attributed weak sentiment in the market to increasing risk-aversion among investors. "The stock market provided 15 billion dollars in 2007 to support investments of firms. But, as global risk aversion has risen in the past few months, this has dented investors sentiments in India too," he added.

Of the total IPOs listed on stock exchanges this year, 11 companies had an issue price above Rs 100. The aggressive pricing of the IPOs have led the companies to lose substantially being unable to sustain the prices in long-term.

In fact, reliance power launched with much fanfare, closed at Rs 372.50 on the opening day, much below its offer price of Rs 450 a share, forcing the company to issue three bonus shares for every five held by non-promoters.

However, state-run rural electrification corporation was trading higher at Rs 109.05 against its issue price of Rs 105 and GSS America at Rs 640.85 against an issue price of Rs 400.

The bearish sentiments in the market has led to 13 firms witnessing red in the market. The Sensex, which opened above 20,300 points in January, has dipped 4,000 points to about 16,400 points since then till yesterday.

IPO Performance - 2004 to 2007

Scrip, Offer Price, Current Price, Listing Date, Total Gain, Annualized gain

INDIABULLS FINANCIAL SERVICES 19.00 981.15 Sep 24, 2004 5,063.95 1,550.62
IND. INFOLINE 76.00 1,773.70 May 17, 2005 2,233.82 851.98
BHARATI SHIPYARD 66.00 729.10 Dec 30, 2004 1,004.70 334.90
TULIP IT SERVICES 120.00 1,101.20 Jan 5, 2006 817.67 412.22
PROVOGUE (I) LTD 150.00 1,282.35 Jul 7, 2005 754.90 304.13
PETRONET LNG 15.00 105.30 Mar 26, 2004 602.00 159.92
UTV SOFTWARE 130.00 903.25 Mar 17, 2005 594.81 213.27
NDTV 70.00 459.85 May 19, 2004 556.93 154.00
IDFC 34.00 222.85 Aug 12, 2005 555.44 233.03
GMR INFRA 42.00 249.15 Aug 21, 2006 493.21 362.95
YES BANK LIMITED 45.00 249.60 Jul 12, 2005 454.67 184.19
ABG SHIPYARD 185.00 998.85 Dec 13, 2005 439.92 214.95
ICICI BANK 280.00 1,227.10 Apr 22, 2004 338.25 91.66
INFO EDGE 320.00 1,334.65 Nov 21, 2006 317.08 286.47
GLOBAL BROADCAST 250.00 1,037.85 Feb 8, 2007 315.14 353.93
PUNJ LLOYD 140.00 561.50 Jan 6, 2006 301.07 151.99
ENTERTAINMENT NETWORK 162.00 633.05 Feb 15, 2006 290.77 155.39
NTPC 62.00 241.40 Nov 11, 2004 289.35 92.32
SUZLON 510.00 1,902.35 Oct 19, 2005 273.01 124.25
GUJ. STATE PETRONET 27.00 97.40 Feb 16, 2006 260.74 139.55
VISHAL RETAIL 270.00 946.55 May 4, 2007 250.57 381.08
BANK OF MAHARASHTRA 23.00 78.05 Apr 12, 2004 239.35 64.38
TECH MAHINDRA 365.00 1,141.25 Aug 28, 2006 212.67 158.74
POWER FIN CORP 85.00 262.25 Feb 23, 2007 208.53 245.53
ICRA LTD 330.00 999.95 Apr 13, 2007 203.02 283.91
GAIL 175.80 530.65 Mar 25, 2004 201.85 53.58
RELIGARE ENTERPRISES 185.00 552.15 Nov 21, 2007 198.46 1,857.38
JAGRAN PRAKSHAN 267.00 775.55 Feb 22, 2006 190.47 102.84
3I INFOTECH LTD 50.00 141.95 Apr 22, 2005 183.90 68.35
MUNDRA PORT & SEZ 440.00 1,245.50 Nov 27, 2007 183.07 2,024.85
TANLA SOLUTIONS 265.00 736.95 Jan 5, 2007 178.09 181.07
POWER GRID CORP. 52.00 142.90 Oct 5, 2007 174.81 741.92
GVK POWER & INFRA 310.00 801.10 Feb 27, 2006 158.42 86.17
ONGC 475.00 1,226.75 Apr 8, 2004 158.26 42.44
TCS 425.00 1,080.05 Aug 25, 2004 154.13 46.04
MAYTAS INFRA 370.00 883.35 Oct 25, 2007 138.74 767.29
SHOPPERS STOP 238.00 553.10 May 23, 2005 132.39 50.81
SHRINGAR CINEMA 53.00 122.40 Apr 29, 2005 130.94 49.02
GATEWAY DISTRIPARKS 72.00 162.50 Mar 31, 2005 125.69 45.70
KOUTONS RETAIL 415.00 924.00 Oct 12, 2007 122.65 566.68
AKRUTI CITY 540.00 1,162.90 Feb 7, 2007 115.35 129.15
MOTILAL OSWAL 825.00 1,761.80 Sep 11, 2007 113.55 376.78
ILFS INVESTSMART 125.00 266.50 Jul 27, 2005 113.20 46.63
HOUSING DEV. INFRA 500.00 1,044.75 Jul 24, 2007 108.95 250.11
DLF LIMITED 525.00 1,063.70 Jul 5, 2007 102.61 210.41
BANK OF BARODA 230.00 456.70 Feb 6, 2006 98.57 51.99
DECCAN AVIATION 148.00 280.90 Jun 12, 2006 89.80 57.91
OMAXE LTD 310.00 573.30 Aug 9, 2007 84.94 216.79
EDELWEISS CAPITAL 825.00 1,521.20 Dec 12, 2007 84.39 1,711.20
BIOCON LIMITED 315.00 577.60 Apr 7, 2004 83.37 22.34
INOX LEISURE 120.00 216.95 Feb 23, 2006 80.79 43.69
IDEA CELLULAR 75.00 131.60 Feb 9, 2007 75.47 85.02
PNB 390.00 671.25 Mar 27, 2005 72.12 26.11
PIRAMYD RETAIL 140.00 233.20 Dec 6, 2005 66.57 32.23
MAHINDRA FINANCE 200.00 317.45 Mar 17, 2006 58.73 32.82
CAIRN INDIA 160.00 246.90 Jan 9, 2007 54.31 55.84
BINANI CEMENT 75.00 114.65 May 28, 2007 52.87 89.33
PARSVNATH DEV 300.00 457.45 Nov 30, 2006 52.48 48.50
PVR LIMITED 225.00 325.70 Jan 4, 2006 44.76 22.53
PATNI COMPUTERS 230.00 330.65 Feb 25, 2004 43.76 11.38
ALLAHABAD BANK 82.00 117.25 Apr 28, 2005 42.99 16.08
SPICE COMMU 46.00 62.00 Jul 19, 2007 34.78 77.41
ALLCARGO GLOBAL LOG 675.00 893.25 Jun 23, 2006 32.33 21.26
CENTRAL BANK 102.00 134.65 Aug 21, 2007 32.01 89.19
JYOTHY LABS 690.00 854.55 Dec 19, 2007 23.85 791.31
INDOCO REMEDIES 245.00 302.25 Jan 14, 2005 23.37 7.90
ANDHRA BANK 90.00 105.50 Feb 7, 2006 17.22 9.10
MINDTREE CONS 425.00 494.75 Feb 7, 2007 16.41 18.38
FIRSTSOURCE SOLN 64.00 73.70 Feb 22, 2007 15.16 17.79
CINEMAX INDIA 155.00 170.60 Feb 14, 2007 10.06 11.52
MUDRA LIFESTYLE 90.00 98.65 Feb 9, 2007 9.61 10.83
PURAVANKARA 400.00 429.00 Aug 30, 2007 7.25 21.69
PRITHVI INFO 270.00 288.05 Nov 16, 2005 6.69 3.15
FORTIS HEALTHCARE 108.00 104.50 May 9, 2007 -3.24 -5.03
ROYAL ORCHID HOTELS 165.00 154.60 Feb 6, 2006 -6.30 -3.32
SUN TV LTD 437.50 406.80 Apr 24, 2006 -7.02 -4.16
JET AIRWAYS 1,100.00 987.65 Mar 14, 2005 -10.21 -3.65
IVR PRIME 550.00 452.20 Aug 16, 2007 -17.78 -47.72
HOUSE OF PEARL 550.00 280.90 Feb 15, 2007 -48.93 -56.16