Good news for IPO investors !

Investors no longer have to wait for weeks for refund of their IPO application money.

The application money earmarked for an IPO will now remain in the applicant’s bank account till the allotment is finalised, thus eliminating the refund process, SEBI said on Tuesday, addressing a long-standing grouse among investors, particularly in the retail segment.

“The modalities in this regard would be worked out separately,” said a news release from SEBI, issued after its Board met on Tuesday.

“The Board approved, in principle, the concept of making lien on bank account as an alternative mode of payment in public/rights issues.”

This means that the money marked for the IPO will not be used for any other payment obligation during that period.

At the same time, the applicant will enjoy the interest payable on the amount.

This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest, said officials associated with the IPO process.

Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that of January 2008 does not occur again.

At that time, many investors were unable to buy scrips which were at attractive lows, as their money was locked up in the Reliance Power and the Future Capital IPOs. Nor could they meet their margin money requirements.

PMs – NO POOLING

The SEBI Board also decided to disallow the pooling of investors’ money by portfolio managers.

“Portfolio managers should not float a scheme or pool the resources of the client in a way which is akin to mutual fund activity,” said SEBI.

They have been allowed six months’ time to convert their operations managed on pooled basis to individual basis.

The Board also decided to enhance the minimum net worth requirement for registration of portfolio managers from the existing Rs 50 lakh to Rs 2 crore in a phased manner.

via BL

IPOs - not profitable always

Investors who subscribed to the initial public offer, in the first quarter of 2006, of shares by Sadbhav Engineering are a fortunate lot. Against an investment of Rs 185, the stock closed at Rs 1,080 on Wednesday, an appreciation of more than five-fold in the space of just two years.

So, is investing in initial public offerings (IPO) a safe bet? The answer is no, if we go by the performance of the IPOs of the last two years. Actually there is one in two chance that you wouldn’t have made any money at all. According to data available on NSE Web site, around 181 companies had come out with IPOs to raise money since the commencement of the bull-run that began in early 2006. Of these, about 50 per cent – 92 stocks to be precise – are quoting below the issue price. Seventy companies approached the market for funds in 2006. The number increased to 89 in 2007 and it is 13 in the year to date.

IPOs have been punished across sectors and irrespective of the subscription levels. For instance, shares of companies as diverse as Reliance Power, Future Capital, MindTree Consulting and Sobha Developers which had evoked strong response from investors at the time of initial placement are currently ruling below their issue prices. Even ICICI Bank which came out with a follow-on public issue at Rs 940 is currently quoting well below that price.

A Mumbai-based broker said: “When a stock first starts trading, its price moves up to higher level on pent-up demand. Investor demand is often unusually heavy due to the hype surrounding an IPO, particularly for high-profile companies.”

But even among those that did not evoke a frenzy in the run-up to the IPO on the scale of Reliance Power, there have been significant losers. Uttam Sugar Mills (81 per cent), Broadcast Initiatives (80 per cent) and Raj Rayon (79 per cent) are some of the companies that registered major losses.

For investors, the sentiment had turned so adverse in recent times towards any fresh commitment that many companies were forced to withdraw their IPO plans. Among the few that postponed their plans for mobilisation of capital from the public included such high-profile issues as Emaar MGF and Wockhardt Hospitals.

But there have been a few notable exceptions among the IPO stocks besides Sadbhav Engineering that have emerged unscathed despite the Sensex losing 6,000 points in just two months. Though they have declined from their peaks, are still quoting higher than the offer price even while the market has been under a strong bear hug. MIC Electronics is one such. As against the issue price of Rs 150, the share closed at Rs 703.7 on Wednesday, a return of 369 per cent over cost.

According to analysts, investing in IPOs is also as risky as investing in secondary markets. Investors must go beyond the allure and hype of IPOs and educate themselves about the company’s fundamentals, they said.

Via Businessline

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All about IPOs

All about IPOs

Rules of IPOs

How swiftly the mood of the markets can swing from sunny optimism to extreme scepticism! The withdrawal of two big-ticket initial public offers (IPOs) by Wockhardt Hospitals and Emaar MGF this week underline how fragile the all-important factor called ‘investor sentiment’ really is. Barely three weeks ago, IPOs from Reliance Power and Future Capital Holdings sported record subscription figures, having garnered runaway response from every class of investor. The n, those rushing to hop on to the IPO bandwagon were hardly deterred by the stiff asking price or ‘execution’ challenges that faced these companies, both of whom rolled out their IPO at a rather nascent stage of their business. Yet, it is precisely these reasons that are now being cited for the unenthusiastic response to the Wockhardt and Emaar offerings.
Institutional appetite waning

It is not merely individual investors, bruised by the recent blows to their net worth, who seem to have lost their appetite for IPOs in three short weeks.

Retail investors, in any case, tend to take their cues from the larger institutions; which is why IPO subscriptions tend to bunch up on the last days of the offer period.

The larger worry for Indian investors, and the markets in general, should be the extremely tepid response from QIBs (qualified institutional bidders).

That institutional investors cold-shouldered a globally recognised name such as Emaar in the hot real-estate sector, after lavishing their attention on a slew of lesser-known names in 2007, is disturbing.

This suggests a genuine waning of liquidity and appetite for risk, at the global level. A recent report from Thomson Financial states that globally a total of 21 IPOs, worth $6.3 billion, were withdrawn in January. India, until recently, was an exception to this trend; but no longer.

‘Superior’ growth prospects or not, liquidity remains the engine that powers stock markets. When it comes to liquidity, India’s primary market, much like its secondary market, depends heavily on the favour of global investors.

A good number of retail investors, in any case, were in the game mainly for listing gains. With present secondary market conditions making huge listings difficult, those on the speculative fringe may remain on the sidelines until the frenzy starts all over again.
Structural shift

This being the case, the failed IPOs may flag off two key trends for the stock markets in the months ahead. One, the flow in the IPO pipeline may dwindle as those with a limited track record rethink IPO plans.

Two, with global investors in a risk-averse mood, markets may no longer be willing to pay any price for a new business idea. Valuations, whether for new offers or already listed companies, may moderate. In the buoyant markets of the past few months, businesses and stocks that captured the imagination were able to justify sky-high values, on the strength of fancy “valuations” assigned to nascent businesses that were still on the drawing board.

These developments may also require retail investors in IPOs to make some changes in their investment strategy for the months ahead. The key takeaways for them from the turbulence of the last week are:

Listing gains are no longer a certainty. This means that investors cannot bank on flipping a stock on listing to recoup high funding costs incurred to bid for the IPO. Investors may be better off avoiding leveraged bets on IPOs, no matter how attractive the business or the “grey market” buzz on the stock is.

Investors should go back to evaluating every IPO much as they would a stock in the secondary market. Businesses that have alternatives in the listed space may no longer be able to command huge valuation premia, just because they are garnering funds through an IPO. Newly listed stocks may no longer remain islands of high valuation, with large trading volumes, in current market conditions.

Finally, while making their decision, investors should factor in the opportunity loss involved in taking the IPO route. Quite a few retail applicants to the Reliance Power IPO probably sacrificed attractive opportunities to buy into blue-chips of their choice when they were available at rock-bottom prices in the recent market correction.

A significant part of their funds was locked into the offer. Allocating only a portion of your overall equity portfolio to IPOs and participating only in high conviction ones may be the best way forward.

Via Businlessline

IPOs make a lot of money for investors in 2007

Three out of every 10 stocks that were listed on Indian bourses this year returned more than 100% to investors. And three lost money for investors. Five returned more than the benchmark index of the Bombay Stock Exchange, which gained 36.9%, an indication, according to one analyst, of the hype-induced demand for these stocks.

Overall, 102 firms made their debut on the bourses this year between January and 20 December, raising Rs32,816.50 crore through initial public offerings, or IPOs.
“This year saw too much of foreign funds coming into India and artificial demand was also created in the market by the hype during the book-building process of new issues,” said Deven Choksey, managing director, KR Choksey Shares and Securities Ltd, a domestic brokerage.


Under the book-building process, investors bid for the price they are willing to pay for a stock, within a prescribed band. The offer price is fixed based on the response of investors. With the exception of a few issues, almost all IPOs were subscribed many times over, and the offer price fixed at the upper end of the band.
Foreign institutional investors (FIIs) have so far invested $16.4 billion in Indian equities this year, after investing $7.9 billion last year.
Mumbai-based Orbit Corp. Ltd tops the list of stocks that listed in 2007 in terms of performance, with returns of 645%. Shares of the construction firm, which listed at Rs90 in April, around a 18% discount to the issue price of Rs110, closed at Rs819.60 on Wednesday. Three stocks this year have returned more than 400% returns: Allied Computers International (Asia) Ltd (489.5%), Everonn Systems India Ltd (443.4%) and MIC Electronics Ltd (429.9%).
All returns were calculated on the basis of the offer price and the closing price of shares of the firms on Wednesday. For some stocks, this means the returns were calculated over a period of several months; for others, it means over a period of a few weeks. Two stocks returned between 300% and 400%, four between 200% and 300% and 20 between 100% and less than 200%.
An investment banker, who did not wish to be identified, said bankers managing IPOs were being extra cautious while pricing issues and discovering the real worth of the stocks in the secondary market after their listing. “While deciding on the offer price, lead managers are giving discounts to ensure the issues are sold. After they are listed, the stock finds its own price.”
The response to IPOs bears this out. While Orbit’s IPO was subscribed only 3.85 times, the Allied Computers issue was subscribed more than 30 times, and the Everonn Computers issue more than 131 times.
“At present, IPOs are a lottery and it’s all about getting allotment. These stocks are giving high returns since they were under-priced,” said Prithvi Haldea, chairman and managing director, Praxis Consulting & Information Services Pvt. Ltd, which puts out Prime Database, a primary market tracker. According to him, large institutional buying—between 50% and 60% of any public issue—also contributes to the rise in prices of freshly listed stocks. “In the past, the issues were sold mostly to retail investors. Institutional investors can easily exert pressure on the pricing,” Haldea said.
When a firm offers 10% of its equity to the public, 30% of the offer is reserved for retail investors, 10% for high net worth individuals and the rest for institutional investors. For lar-ger public floats, where a firm offers 25% of its equity, the po-rtion reserved for retail investors goes up to 35% and that reserved for high net worth individuals and institutions is 15% and 50%, respectively. In both cases, institutions are allowed to buy leftover shares in the other categories.
The Sensex returned around 46% last year, but corresponding returns from IPOs were muted. Only 23 stocks, out of the 95 that listed in 2006, returned more than the benchmark index. And only one in every nine stocks returned more than 100%. More than 45% of the stocks that listed in 2006 lost money for investors.
In contrast, fewer stocks have disappointed investors this year. Thirty-one of the 102 IPOs this year have given negative returns. The worst of the lot is House of Pearl Fashions Ltd. Priced at Rs550, it listed on bourses in February at a 10% discount and closed on Wednesday at Rs262.05, down more than 52% from its offer price. Broadcast Initiatives Ltd, that started trading in March, has also seen its value erode by more than 50% from its offer price.
While some investors buy IPOs with the sole intention of selling the stock on the day it lists, there are a few who invest in IPOs for the long term.
“Any IPO is great news for small investors like me but the problem is getting allotment of shares in a primary issue. Since there is always oversubscription, it is becoming increasingly difficult to get shares. As we get very few shares, the funds get locked till the listing date and I cannot invest in other stocks,” said Vishal Thakkar, an accountant in a multinational firm, who has been investing in IPOs for years now.
Analysts are bullish on the prospect for firms that plan to list in 2008, but with a few caveats. “The primary market will boom as long as there is a stable and buoyant secondary market,” Haldea said.
Krishna Kumar Karwa, managing director, Emkay Share & Stockbrokers Ltd, said newly listed firms would continue to give good returns as long as FIIs continued to invest in the country.

Via Mint

Small IPOs make great gains

The big boys like Reliance Industries, Reliance Energy and Bharti Airtel may be the talk of the town for the wealth they have created for promoters and shareholders during the recent market rally.

But proving the adage ‘small is beautiful’, quite a few small companies which went public recently have given handsome returns to their shareholders. Many of them have more than doubled or even trebled their value over the past few months.

Of all the stocks that were listed this year, only around a fourth are trading below offer prices. The rest are quoting significantly higher than their issue prices. Some of them, like Everonn and MIC Electronics, have risen almost three-fold from their offer prices. The point here is, it’s not the much-talked about biggies (DLF, Central Bank, Motilal Oswal) that have given high returns, but it’s a bunch of small and hitherto unknown companies.

Companies like Glory Polyfilms, Ankit Metal, Evinix Accessories, which were listed recently, are now trading a good 50% above their issue prices.

Of the 80-odd issues that were listed recently, more than 50% have raised less than Rs 100 crore. The total market capitalisation of these companies was around Rs 8,000 crore based on their issue prices, which has now risen to around Rs 11,500 crore.

Investors who showed confidence in these not-so-well-known stocks have made a killing. The businesses that these companies are engaged in are also diverse — fire protection systems, flower farming, digital cinema and paper — indicating that investors are ready to bet on off-beat businesses as well. The trend is a testimony to the entrepreneurial spirit in India. And, who knows, these companies could also qualify as blue chips, if not Reliance or a Bharti.

Via ET

Grey Market - Reliance Power IPO, Dhanus, Consolidated, Kouton Retail

What do these numbers mean ?

Read as - Scrip - Offer Price - Grey Market Premium


Power Grid Corporation 52 33 to 35

Dhanus Tech. 280 to 295 45 to 50

Koutons Retail 370 to 415 60 to 65

Consolidated Construction 510 150 to 160

Supreme Infra 95 to 108 50 to 55

Saamya Biotech 10 3 to 4

MAYTAS Infra 320 to 370 135 to 140

Circuit Systems (India) Ltd. 35 3 to 4

Reliance Power 60 to 80, 33 to 34 (NEW!)

IPO market hots up

With sub-prime jitters allayed to some extent, the IPO market is once again hotting up. Most of the IPOs in the grey market that are open for subscription or have been scheduled for listing in the coming weeks are trading at a 30-50% premium in the grey market. The announcement of the Reliance Power IPO has only infused further buoyancy to the primary market.

The remaining quarter could see further action as many infrastructure, energy and power companies are slated to hit the market.

Issues like Koutons Retail, Consolidated Construction, Dhanush Technologies, Saamya Biotech, Kaveri Seeds, Supreme Infra, among others, are all trading at a significant premium to their offer price as per grey market sources. IPOs like that of Power Grid are further expected to generate good returns for retail investors. Going by the current grey market premiums, each share will fetch a premium of about Rs 35. Thus, gaining roughly Rs 10,000 excluding the borrowing cost.

Experts say while pricing the issue, usually 20-25% listing gains are set aside for investors. However, when markets fall, this premium shrinks and many a times the issue becomes unattractive for subscription. Bankers are now trying to leave more on the table, keeping in mind the volatile market conditions.

Sub-prime concerns had taken a toll on some issues slated to hit the markets during those months. Typically, when markets nosedive, listing returns diminish significantly, even if there is enough money left on the table for the investor. Public issue mop-up by Indian companies has gone up during September, with realisations of around Rs 4,000 crore, compared with just about Rs 665 crore in August.

This was mainly because markets did not perform well in August. The mobilisation in September is also significantly higher than about Rs 882 crore raised in the year-ago period, as per Prime Database.

“There is a large pipeline of issues in the coming months. If global markets see a downturn, the issues that have already closed for subscription could see some decline in the grey market premium,” says a merchant banker.

Reliance Power plans $3.5 bn IPO

Reliance Power Ltd, a company of the Reliance-Anil Dhirubhai Ambani Group or R-ADAG, is planning an initial public offering (IPO) aiming to raise $3.5 billion, or nearly Rs14,000 crore, selling shares equivalent to around 30% stake, two persons close to the plan said.
If the share sale goes through, it could be India’s biggest IPO ever, ahead of a float by realty firm DLF Ltd earlier this year.
Reliance Power, a unit of the Bombay Stock Exchange-listed Reliance Energy Ltd, has been valued at $11 billion, an investment banker said, asking not to be named.
Shares of Reliance Energy rose 7.89% to end Friday’s trading at Rs1,205.50 each—close to its highest traded price of Rs1,220—with a market capitalization of about Rs27,550 crore. BSE’s 30-share indicative Sensex expanded 0.8% to 17,291.10 points.
Reliance Energy, led by billionaire businessman Anil Ambani, declined comment. “We do not wish to comment on market speculation,” a spokesman said.
Reliance Power is expected to file the prospectus with market regulator Securities and Exchange Board of India or Sebi next week. Kotak Mahindra Capital Co. and the local unit of JPMorgan Chase & Co. are among the investment banks with a mandate for the sale.
Reliance Power, earlier known as Reliance Energy Generation Co. Ltd, won the mandate to develop a 4,000MW ultra mega power project at Sasan in eastern Madhya Pradesh this June. The so-called ultra mega power project is estimated to cost around Rs20,000 crore.
It could not be immediately ascertained which of Reliance Energy’s other power projects and assets would be farmed off to its unit Reliance Power. About 60% of Reliance Energy’s Rs6,500 crore revenues in fiscal 2007 came from its power business. Stock broking firm Prabhudas Liladhar had estimated the enterprise value of the power business at Rs1.02 trillion in a recent report.
The parent company had stated in the past that it has plans of setting up 20,000MW capacity by 2015. Some among the new projects could be handled by Reliance Power, an R-ADAG official said, preferring to remain unnamed.
Apart from Sasan, Reliance Energy is building a 1,200MW power plant at Rosa in Uttar Pradesh that it bought from the Aditya Birla Group last year and is also developing a 4,000MW project at Shahapur in Maharashtra. Other projects include the 7,800MW Dadri power project that has been mired in controversy over the supply of fuel from Reliance Industries Ltd, which is run by Anil Ambani’s elder brother, Mukesh.
The capacity of Reliance Energy’s Dahanu power station is being raised to 1,700MW from the current 500MW. The Anil Ambani firm also distributes electricity in parts of Mumbai city.
The share sale in Reliance Power is part of a plan to restructure Reliance Energy into three distinct businesses in power, real estate and infrastructure, sectors in which the Mumbai firm is consolidating its presence. Each of these businesses could be listed at a later date, the R-ADAG executive said. Reliance Energy’s engineering and construction business accounts for two-fifths of its revenues and the company has a small presence in real estate, with an 80-acre development near Hyderabad’s upcoming airport.
A sector expert said the proposed share sale and restructuring could be driven by easing finances for the mega projects. “It looks like they are putting their generation projects into one company, which would make it easier for them to raise money for these capital-intensive projects,” said Arvind Mahajan, executive director and head (energy, government and infrastructure) at the local unit of consulting firm KPMG International.
It is not yet clear whether Reliance Energy would finally emerge as the holding company for all the power projects, Mahajan added. “As of now, it looks like it could be a three-tier structure: with individual projects being held by special purpose vehicles, which in turn is held by the company (Reliance Power) and in turn the group holding company (Reliance Energy),” he said.

Dhanus Technologies Allotment Status

This is to inform you that an article was published in a local Tamil magazine - "Junior Vikatan" in its edition dated 29.08.2007 in which it has raised certain allegations against the Company / its promoters and its employees. In this regard, the Company is publishing a public notice in the prominent newspapers on 27.09.2007, giving details of the allegations & the Company's clarifications on the same. The Company is also giving an option to the applicants to withdraw their applications, if they wish to do so, within a period of 10 days from the date of publication of the public notice, viz., 06.10.2007. A separate letter to all the applicants/investors has also been sent in this regard. The further course of action regarding basis of allotment / despatch of refund orders etc., will be organised subsequently.

Download Public Notice here

Letter to Investors

Maytas Infra IPO in Rs 320-370 price band

Maytas Infra, a construction and infrastructure development company, is entering the capital markets with an initial public offering of 8.85 million shares at a price band of Rs 320-370 a share. The company will mobilize Rs 283.20 crore to Rs 327.45 crore at lower and upper end of the price band. The issue will open for subscription on September 27, and will close on October 4, 2007.

The issue will constitute 15.04% of the fully diluted post-issue equity share capital of the company. Out of the total equity float, at least 60% of the issue shall be allocated on a proportionate basis to qualified institutional buyers, out of which 5% would be available for allocation on a proportionate basis to mutual funds.

Incorporated in 1988, Maytas Infra has adopted an integrated business model with a diversified order book. The company has historically focused on the irrigation, road and bridges, and buildings infrastructure sectors, a press release said.

Frankfinn hain na

Amid the growing demand for trained talent in aviation sector, training schools for air hostesses and other airline staff are planning to raise funds by selling shares to the public and private investors.

Two major academies Frankfinn Institute of Air Hostess Training and Air Hostess Academy (AHA) are planning to raise funds through an initial public offer and placement of shares with private equity firms, to meet their expansion targets.

Another key player in this segment, Avalon Aviation Academy, which is part of leading IT training institute chain operator Aptech Ltd, also has huge expansion plans, but is not considering any IPO plan as of now.

Both Frankfinn and AHA expect to hit the capital market with IPOs by the next year.

“The demand for staff would be skyrocketing in the coming 2-3 years. At least 30,000 to 40,000 cabin crew positions and 25,000 ground staff vacancies would crop up,” Frankfinn Chairman K S Kohli told PTI.

Apart from opening new centres, Frankfinn is also planning to buy an aircraft by the next year. The firm plans to float an IPO by mid next year and the proceeds would be used for these new initiatives, Kohli said.

Besides, AHA expects to hit the capital market by early 2008, thus becoming the first aviation academy in India to be listed on the bourses. The firm is planning to dilute 20-25% of its equity through the IPO, AHA’s Founder and Director Sapna Gupta said.

Apart from generating funds through IPOs, both AHA and Frankfinn are also planning to tap private equity investors.

”Many private equity players have shown keen interest in investing in Frankfinn. We do not rule out the possibilty for offering stake to them, but nothing has been finalised as yet,“ Kohli said.

“A pre-IPO placement should be concluded by end of this year,” AHA’s Gupta said.

Currently, AHA is holding talks with leading Indian private equity firms, she said, but declined to give names.

On whether Avalon was also seeking to tap the capital market to raise funds, company vice-president Preeti Mallik said, “As of now we do not have any plans.”

Currently, Avalon has 29 centres and is planning to expand to about 40 centres by the end of the year.

“As per our estimates, close to 8,000 vacancies would be created by the private airlines in the last quarter of this year,” AHA’s Gupta said.

AHA, at present has 32 domestic centres and is planning to open more, mostly in tier II and three III cities like Goa, Hyderabad and Lucknow.

It believes there is more potential in smaller cities in terms of eager-to-learn and dedicated potential employees, and ample opportunities as major airlines eye these small centres. It also plans international centres in Australia and UK by next year.

Frankfinn has opened 40 new domestic cabin crew schools this year across the country, including in small town like Kota, Hubli and Dhanbad. It has currently 117 centres in 95 cities and plans to open its first international centre in Dubai during Ramzan this year, and 8-10 more international centres by March 2008.

Koutons Retail India Limited

Qualified Institutional Buyers (QIBs) - 66.3762 times

Non Institutional Investors - 18.8385 times

Retail Individual Investors (RIIs) - 14.8192 times

OVERALL -45.52 times

Consolidated Construction Consortium IPO opens on 18 September 2007

Price band Rs 460-510 per share

Consolidated Construction Consortium is likely to raise Rs 190 crore from its initial public offering of 37 lakh equity shares of Rs 10 each.

The company has fixed the price band of the 100% book build issue at Rs 460-510 per share. At the floor price the company would raise Rs 170 crore. The issue opens on Tuesday, 18 September 2007 and will close on Friday, 21 September 2007.

The issue would constitute 10.01% of the fully diluted post issue paid-up capital.

The company intends to use the proceeds to finance the acquisition of construction infrastructure, investment in subsidiaries, expenditures towards its skill and management development centre, and repayment of loans.

Consolidated Construction’s order book stood at over Rs 2,000 crore as on 31 July 2007. For year ended March 2007, it reported net profit of Rs 47.68 crore, on total income of Rs 868 crore.

The company undertakes turnkey building contracts for corporate, infrastructure and realty players. It has clients in sectors such as IT, manufacturing, retailing and education.

Khadim India IPO

To offer 55 lakh shares via issue

Footwear retailer Khadim India will come out with an initial public offer of 55 lakh shares to set up a new central distribution centre, retail stores and improve infrastructure. The company is likely to do a pre-IPO placement.

The company plans to spend about Rs 31.4 crore on exclusive footwear retail stores, Rs 42.43 crore on lifestyle retail stores and Rs 9.06 crore on its distribution centre.

Khadim reported net profit of Rs 2.9 crore on sales of Rs 149 crore in the year ended March 2007.

Poll Results - Investing in Power Grid IPO?

YES !! - 452 votes - 80%

No Way! - 62 votes - 11%

Maybe - 48 votes - 8%

TOTAL Number of VOTES - 562 votes

Power Grid Subscription Details

One day before it closes, here are the Power Grid subscription details

Qualified Institutional Buyers (QIBs) - 18.4192 times

Non Institutional Investors - 0.4895 times

Retail Individual Investors (RIIs) - 1.0748 times

Are you applying ? Leave a comment, vote in the poll above !

Magnum Ventures IPO Subscription

Qualified Institutional Buyers (QIBs) - 2.3434 times

Non Institutional Investors - 3.9228 times

Retail Individual Investors (RIIs) - 3.3854 times

IPO investors selling post listing

Initial public offers are selling like hot cakes even during the recent turbulent times on the bourses, but it has become more of a short-term opportunity with close to 60 per cent of the companies seeing a sell-off by a large number of small investors within days of listing.

An analysis of all the IPOs that hit the bourses in the past one year shows that 43 companies witnessed a decline in the number of shares held by small individual shareholders. This is based on the pre-listing and the mandatory quarter-end shareholding data disclosed by the companies.

As many as 76 companies have come out with their IPOs since August last year and both pre-listing as well as quarter-end shareholding pattern is available for 71 of them.

According to market observers, short-term investors in IPOs tend to sell their shares mostly on the first day -- which is evident from the huge trading volumes recorded by the stocks on their first day on the bourses. Besides, they do not want to take a risk on whether the momentum generated by the IPO would continue, said a broker.

Brokerage firm Motilal Oswal Financial Services Ltd's chairman and managing director Motilal Oswal told PTI: "It is true that a number of investors have started behaving like passengers when it comes to investing in IPOs. They tend to put money in a public issue, book profit from the listing gains and then invest in another IPO," he said.

Incidentally, Motilal Oswal's IPO closed on August 23 with more than 27 times of over-subscription. It is the strong appetite for IPOs that helped the IPO sail through even during the turbulent phase on the bourses, said a broker.

According to data with stock exchanges, companies who saw decline in their small individual shareholdings include Development Credit Bank, Global Broadcast Network, Idea Cellular, Indian Bank, Lanco Infratech, Raj Television, Power Finance Corp, Sobha Developers and Tech Mahindra.

Besides, Info Edge India, which owns job portal Naukri.com, Hanung Toys, fashion goods firm House of Pearl, Mudra Lifestyle, Nissan Copper, AMD Metplast, Atlanta, Accel Frontline and Action Construction also recorded a decline.

Small retail investors are defined as those who hold shares worth up to Rs one lakh in a company. The retail portion of Motilal Oswal IPO was subscribed more than four times, while that of Indowind Energy Ltd also closed with over-subscription.

The post-listing selling of shares by small investors comes amid an average gain of about 23 per cent recorded on their first day of listing, followed by further upward rally in the following days when those investors rush to buy the shares who had been left out in the primary market.

Investors have benefited from the robust first-day gains over the issue price. Based on the individual first-day gains recorded by each stocks, an investor would have netted a gain of Rs 3.8 lakh on a portfolio of 100 shares of all the firms that came out with IPOs in the past one year.

Most of the companies that have seen sell-off by small shareholders recorded significant first-day gains over their issue prices, while some of those who ended with a discount also recorded sale of shares by them.

Shares of Fiem Industries, House of Pearl, Raj TV and Gremach Infra closed below their respective issue prices in the debut trade, but small investors seem to have pared their exposure in the following days after booking some gains.

Vishal Retail is the only company that has seen no change in the net holding of small shareholders, although the stock had recorded a gain of 178 per cent in its debut trade.

A total of 28 companies -- including Akruti Nirman, Cairn India, FirstSource Solutions, GMR Infra, Mindtree Consultancy, Pyramid Saimira, Fortis Healthcare and ICRA -- saw their base of small shareholders increasing after listing

IPO myths

Lots of investors who may have subscribed to the initial public offers (IPO’s) are under the impression that they strike a goldmine when the IPO lists at a premium. But this may not be entirely correct.

Promoters’ wealth swells when the shares list at a premium as in most cases they have a majority holding. But whether the IPO listing has been profitable for retail investors can be understood from the following illustration. (In this study, only companies that have floated their IPOs with issue price above Rs 100 per share in calendar year 2007 and listed at a premium have been considered.)

Suppose a person invests Rs 1 lakh (the cap for small investors) in IPOs of two companies. Let us select from our sample a company whose shares ended with the highest premium on the day of listing, and a company whose shares closed with the least premium.

Everonn Systems’ shares settled with the highest premium on day 1, while DLF’s shares closed with the least premium.

By investing Rs 1 lakh in Everonn Systems’ IPO, the investor would have effectively applied for 714 shares. But because of the huge subscription of 123.80 times in the retail segment, he would have been allotted only six shares. The profit on day 1 would be Rs 338 per share (difference between close price and issue price). The investor would have made a total profit of Rs 2041 (Rs 338* 6 shares). The return on investment (ROI) in this case is just 2.03% (i.e., Rs 2041 earned on investment of Rs 1 lakh).

However, when the same investor puts in Rs 1 lakh in the DLF IPO, he would have applied for 190 shares and got full allotment of 190 shares as the retail portion was subscribed just 0.97 times. The profit on day 1 would be Rs 45 per share (difference between close price and issue price). The investor, thus, would have earned total profit of Rs 8550 (Rs 45* 190 shares). The ROI in this case is 8.55% (Rs 8550 earned on investment of Rs 1 lakh).

From this comparison it is seen that a retail investor with an investment of Rs 1 lakh earned 4.19 times more profit in a company which settled with the least premium on day 1 than the company which settled with the highest premium on day 1. Effectively, this means besides listing premium, oversubscription has an impact on investors’ return on investment. Higher the oversubscription lower is the return.