What To Expect From The MCX Listing On March 9?
DSIJ Intelligence / 07 Mar 2012
With all the hype that's been created around the MCX IPO, we would like to bring to notice of our readers that as per the new SEBI norms, the conventional listing day gains that investors saw in the past issues may not occur here.
This helped the company raise Rs 663 crore at an upper price band of Rs 1,032 a share. Investors must note that this strong response to the MCX IPO has been in the aftermath of a scary performance by the markets in the year 2011, when many of the companies either pulled out their IPOs due to subdued market conditions or were involved in alleged scams.
It is commendable to note that the confidence in the MCX IPO is so strong that its shares are currently quoting a premium of Rs 400-410 per share in the grey market. But as per the new SEBI norms, we believe that the conventional listing day gains that investors saw in the past issues would not occur here.
As per the new norms, investors must note that the shares of MCX would initially go through a pre-open session period which will last for an hour between 9 am and 10 am. During this period, investors would be allowed to punch in orders, modify them and/or cancel them during the first 45 minutes. The rationale behind such a move is aimed at protecting the interest of the retail shareholders from artificial price-rigging on the bourses.
However, the real deal of the new norms introduced by SEBI state that all the IPO listings on the bourses would be controlled by circuit limits right from day one. As per SEBI, in case the equilibrium price (price at which the bid rate matches with the ask rate) is discovered during the pre-open session, the price band for normal trading session shall be 20 per cent of the equilibrium price. In case the equilibrium price is not discovered, then the 20 per cent circuit limit would be applicable on the issue price. While the above mentioned rules are in place for companies with issue sizes in excess of Rs 250 crore, the ones with issue size up to Rs 250 crore would have set circuit limits of 5 per cent either on the equilibrium price or the issue price as stated above.
Therefore, as MCX falls in the bracket of Rs 250 crore and above, its shares would trade within the range of 20 per cent either on the equilibrium price or on the issue price. If in case the equilibrium price is not met during the pre-open session and the issue price becomes the trade open price during the normal hours, then we won’t see a price in excess of Rs 1,238 per share on listing.
Hence for all those investors who apply to IPOs with a view of enjoying stupendous listing day gains, these norms would imply a cap on their expected gains. While, in view of the broader markets, the pre-open session will help reduce the high volatility and price movements witnessed on the first day of listing, it is still to be seen how things pan out on the day of the listing. With MCX being the first IPO to hit the markets post the announcement of the new norms and judging by the ONGC auction flop show, SEBI would be under tremendous pressure to pull off these new norms with success.
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