Muthoot IPO disappoints on listing

The Initial Public Offer (IPO) from gold loan provider Muthoot Finance has disappointed investors, who were hoping for better listing gains. This was despite a sharp rise in broader markets.

Muthoot shares closed just a tad higher than its issue price of Rs 175 in the first trading session. During the day, the stock slipped significantly below the IPO price to touch a low of Rs 161 on the bourses. On the Bombay Stock Exchange (BSE) the stock was listed at Rs 180 with a 2.8 per cent premium to its issue price.

On the National Stock Exchange the stock opened at a premium of 12.3 per cent at Rs 196 and touched a high of Rs 198. But not many investors could take advantage of the premium as it did not last long. Players and punters with higher leveraged positions went on a selling spree, said Mumbai-based brokers.

Muthoot was the second IPO in this financial year to be listed but fall below the issue price. Shilpy Cable, also listed in April, is trading below its issue price. The stock is down 64.7 per cent at Rs 24 against the issue price of Rs 69. Although it would be a bit premature to judge Muthoot by the first day of trading, the poor performance by both IPOs seemed to follow the path of past several IPOs. This, say market players, has spooked investors and regulators.

In FY11, 70 per cent out of the 55 listed IPOs were trading below their issue price. Several others had slipped below the initial price but, somehow managed a recovery. While the Securities and Exchange Board of India has already asked merchant bankers to ‘rationalise IPO pricing and leave something for investors on the table’, market players say mere announcements will not be enough to bring back investors.