Volatile mkts put new issues in troubled waters

Volatility in the secondary markets has forced some initial public offers (IPOs) to revise their price bands as markets continue to be plagued by liquidity problems.

The most recent casualty has been the mega-IPO of Emaar MGF, which has reduced the price band by 9-11 per cent, from Rs 610 to Rs 690 a share to Rs 540 to Rs 630 a share.

At the earlier price band, the company would have raised up to Rs 7,077 crore but with the revised price band, the company is likely to raise only up to Rs 6,462 crore.

"It is unfortunate that most of the companies raising money through IPOs have an aggressive price band and do not leave anything for investors. Under the current circumstances, when DLF is trading at Rs 800, it's difficult to figure out how Emaar is valued higher than DLF," said Deven Choksey, Managing Director, KR Choksey Securities.

Yesterday, Wockhardt Hospitals announced that the company would revise the price band for its IPO to Rs 225 to Rs 260 a share against Rs 280 to Rs 310 a share. Consequently, the IPO did not start on Thursday as scheduled because the company has to notify Sebi.

"The IPO will now open on February 1 and will close on February 5. Technically, the issue was open on Thursday but it did not get any bid because of a confusion over the lot size, which will stay the same (20 shares)," said the official spokesperson for the Wockhardt Hospitals IPO.

With the revision in the price band, Wockhardt Hospitals is likely to raise up to Rs 652 crore against Rs 777.7 crore earlier, a shortfall of Rs 125.7 crore.

Smaller IPOs that used to be subscribed several times over till last year are finding it hard to attract investors, especially retail investors, The Bang Overseas IPO that closed on Thursday was priced in a band of Rs 200 to Rs 207 a share. The Qualified Institutional Buyers' (QIB) portion was subscribed 1.14 times and the retail portion 1.17 times.

KNR Constructions, which was subscribed 1.25 times based on preliminary bidding data received from the stock exchanges, was priced in a band of Rs 170-180 a share. The offer price has been fixed only at the lower end of Rs 170 a share.

The Shriram EPC IPO, which closes tomorrow, has been subscribed 2.17 times as of 8.30 pm, with the QIB portion subscribed 3.57 times and retail just 0.076 times. The IRB Infrastructure Developers IPO was subscribed 0.44 times on day one, with the QIB portion subscribed 0.73 times and the retail portion subscribed 0.0035 times.

The benchmark index, Sensex, has declined 7.4 per cent since Reliance Power's IPO closed on January 18. The offer raised the maximum Rs 12,000 crore, the largest new issue to date, after the IPO sold out in the first minute. Secondary markets have gone into a tailspin on weak global cues and a liquidity crunch following the Reliance Power IPO.

IPO BAROMETER

Emaar MGF: IPO opens on February 1: Price band lowered to Rs 540-630 from Rs 610-690

Wockhardt Hospitals: IPO to open on January 31, but postponed pending regulatory approval: Price band lowered to Rs 225-260 from Rs 280-310

Bang Overseas: IPO closed on January 31: Subscribed 1.24 times; retail subscribed 1.17 times

KNR Constructions: IPO closed on January 29: Fixes price at the lower end of the band at Rs 170

IRB Infrastructure: IPO opened on January 31: Subscribed 0.44 times on Day One

Sriram EPC: IPO closes on February 1: Subscribed 2.17 times according to latest data