IPO hunters lose Rs 14k cr in one year

Primary market investors have hit the jackpot with many of the past new issues attracting hefty premium on listing and recording sharp appreciation in the subsequent weeks. But, not all primary market investors have been lucky enough to gain from the boom as some of newly listed companies have lost momentum after the initial euphoria.

Investors have lost wealth to the tune of Rs 14,000 crore in about 60 companies listed in the past one year as their share prices have fallen substantially since listing. Some of them have even slipped below offer prices, going by the trend on the BSE.

Reliance Petroleum (RPL) topped the list, recording a m-cap loss of Rs 8,307 crore since its listing on May 11, ’06. From its listing price of Rs 85.5, the RPL stock price has fallen 22% to end at Rs 67 on Wednesday. The Sensex rose 9.5% during the period. The scrip, however, is still quoting at a premium to the offer price of Rs 60 per share.

Apart from RPL, there are many other companies whose stocks have lost ground but still quoting above offer prices. GTL Infrastructure, Tantia Construction, Inox Leisure, ABG Shipyard, Plethico Pharmaceuticals, Royal Orchid and PVR are few notable examples of this phenomenon. They are currently quoting at a discount of 3% to 32% (Tantia Construction) to listed prices but at premium between 12% and 301% (GTL Infrastructure) to offer price.

Analysts cite many reasons for these companies’ underperformance against the market which has been on a dream run after crashing below 9,000 in June. Large companies like RPL is a long term bet given the nature of the project the company has been implementing, said an analyst at a leading domestic brokerage.

In April this year, RPL had gone public with an offer of 135 crore shares through the 100% book building route. The issue proceeds are being utilised to part finance the Rs 27,000-crore export-oriented refinery being set up in a special economic zone at Jamnagar in Gujarat. The project is likely to go on stream by December ’08.

Analysts also said new listings could not sustain momentum probably because the market felt offer prices were higher than expectations. This could be one reason why some of the IPOs are quoting below offer prices in the current market. As many as 30 of the 60 new listings are currently trading below their respective offer prices.

GVK Power, Pyramid Retail, Prime Focus, Repro India and Global Vectra are few such examples.