Fortis Healthcare IPO - Abhishek - Our Reader

One of our readers has this to say about Fortis IPO Article that appeared on this site

Am just an NRI interested in subscribing to the Fortis IPO.

In relation to your views expressed in the article I have the following comments: While they are reasoned, I do beleive you grossly overlook the importance of the strong private palcement demand for the stock and the ability of that as a signal to retail investors about the liklihood of any Escorts litigations succeeding against FHL.

It has been reported elsewhere (and possibly in the Hindu) that a number of funds, including McKinsey's VASCO and a Private Equity fund sponsored by George Soros, have bought into the company at a valuation of Rs.144, which is a good Rs.34 above the upper limit of the 92-110 band available to retail investors.

Dont you think these well informed, advised and asture investors would have had their lawyers take a VERY thorough look at the litigation risks and the likelihood of any adverse decision BEFORE any money was committed at a valuation HIGHER than the retail investors?

While you can argue that these guys must have sought to include a caveat in the sale and purchase agreement that they could withdraw in case of an adverse decision in the Escorts litigation, remember that they would also most likely be required by SEBI, as well as contractually via the sale and purchase agreement, to commit to a lock in period.

As such, it would have been prudent of you to inform your readers of the above. It is a very good signal that retail investors can use to guage for themselves the relative risks of the Escorts litigation, which, as the above demonstrates, are arguably low.

In my humble view based on nothing more than common sense, the valuations these institutions bought at clearly points to these institutions taking the view that the litigation claims FHL faces would not be likely to succeed.

I simply feel that, in telling retail investors to wholeheatedly 'avoid' the issue, you have gone too far without telling them about the strong signals that have already been sent by savvy institutional investors who can afford and would have sought opinions from the best legal minds about the likelihood of the Escorts litigation succeeding.

I trust you will take these comments in the right spirit. I am not trying to criticise, but merely pointing out that, when you are in a position of power; when you have the ability to add to or take away from painstakingly built commercial goodwill, you must in good conscience paint a full picture for your readers. You can certainly focus on what you feel deserves the most attention, but paint the full picture.