Reason: Few issues have enabled investors to make listing gains.
Retail investors have not warmed up to initial public offers (IPOs). This was evident in JSW Energy’s recent IPO, whose retail portion was subscribed only 40 per cent, data from the National Stock Exchange (NSE) showed. Before the last year’s financial crisis and the stock market crash, the retail portion of IPOs used to be subscribed three-four times.
The non-institutional segment, or high net worth individual (HNIs) segment, did worse. The company got bids for only 15 per cent shares in the HNI category, in contrast to its institutional portion, which was subscribed 2.88 times. In all, the issue was subscribed 1.68 times.
Two other recent IPOs, Cox and Kings (India) in November and Den Networks Ltd in October, were also under-subscribed in the retail segment.
In the Cox and Kings (India) IPO, retail investors subscribed to 98 per cent of the shares reserved for them. In case of Den Networks, bids were received for just 9.6 per cent of the shares reserved for the retail category.
Cox and Kings collected Rs 610 crore at Rs 330 per share. The institutional segment was subscribed 10.69 times, with foreign investors bidding for 9.95 times the shares reserved for them. In all, the issue was subscribed 6.30 times.
In Den Networks’ case, institutions bid for 4.12 times the shares reserved for them. The stock, priced at Rs 195 per share, closed at Rs 185.65 on the Bombay Stock Exchange (BSE) today. The stock had touched a low of Rs 149.50 on November 24.
The response from retail investors is not a complete surprise as shares of 9 of the 16 companies that launched their IPOs this year are trading below their issue prices. HNIs have also shunned primary markets after the disappointing listing of state-run National Hydroelectric Power Corporation and Adani Power.
| TRADING WITH CAUTION | ||||
| Date of listing | Issue | Listing | Dec 10, ‘09 | |
| Edserv Softsys | Mar 2, ‘09 | 60.00 | 55.00 | 231.10 |
| Rishabhdev Tech | Jun 29, ‘09 | 33.00 | 42.00 | 18.10 |
| Mah Holiday | Jul 16, ‘09 | 300.00 | 315.00 | 394.80 |
| Excel Infoways | Aug 3, ‘09 | 85.00 | 93.05 | 61.15 |
| Raj Oil Mills | Aug 12, ‘09 | 120.00 | 125.05 | 67.20 |
| Adani Power | Aug 20, ‘09 | 100.00 | 105.00 | 95.70 |
| NHPC | Sep 1, ‘09 | 36.00 | 39.00 | 33.25 |
| Jindal Cotex | Sep 22, ‘09 | 75.00 | 75.00 | 109.25 |
| Globus Spirits | Sep 23, ‘09 | 100.00 | 110.00 | 93.30 |
| Oil India | Sep 30, ‘09 | 1050.00 | 1019.00 | 1236.60 |
| Pipavav shipyard | Oct 9, ‘09 | 58.00 | 60.05 | 57.75 |
| Euro Multi | Oct 15, ‘09 | 75.00 | 70.00 | 31.50 |
| Thinksoft Global | Oct 26, ‘09 | 125.00 | 100.00 | 265.80 |
| Indiabulls Power | Oct 30, ‘09 | 45.00 | 44.95 | 32.95 |
| Den Network | Nov 24, ‘09 | 195.00 | 195.00 | 185.65 |
| Astec Lifescien | Nov 25, ‘09 | 82.00 | 85.55 | 92.50 |
| Note: Price in Rs | ||||
“Retail investors will not touch IPOs until they see a couple of good listings. Bankers and company officials will have to allow retailers to make some listing gains,” said Deven Choksey of Mumbai-based KR Choksey Shares and Securities.
Stock brokers said the shares were listing below issue prices as bankers and companies were allotting shares to a few institutions at 30-50 per cent discount. “The IPOs are over-priced and companies are overstating their need for money. Institutions acting as financiers do not suffer as they get shares at a discount and companies get the required funds. Later, these financiers dump the shares at a price much higher than the allotted price,” said another stock broker.
The list of IPOs that have fizzled after listing include Adani Power (trading at Rs 95.70 as against the issue price of Rs 100), NHPC (trading at Rs 33.25 as against the issue price of Rs 36), Pipavav Shipyard (Rs 57.75, issue price Rs 58) and Indiabulls Power (Rs 32.95, issue price Rs 45).
