IPO Rush: Investment Sentiment Improved In December

The primary market has remained rather dull for most part of FY13. 14 companies raised a total Rs 502.65 crore during the first half of FY13, which is really a very small amount as compared to the past three years. However, the markets have been rallying quite smartly over the last two and a half months and this seems to have kindled optimism among companies looking at raising funds from the equity markets.

Between April 2012 and November 2012, 15 companies (10 on SME indices) got listed. These companies raised between Rs 4.08 crore and Rs 200 crore amounting to a total of Rs 698.51 crore. These statistics seem to be very dull when compared to what was seen in FY09 (post the subprime crisis).

However, an improvement in overall sentiment is now evident with the intended amount to be raised in December 2012 being in the range of Rs 5060.05 crore and Rs 5707.88 crore. Of the four companies offering shares for subscription, Bharti Infratel alone intends to raise between Rs 3966.90 crore and Rs 4533.60 crore. PC Jeweller and Credit Analysis and Research (CARE) intend raising anything between Rs 500 crore and Rs 600 crore each.

In a statement to the media, SEBI Chief U K Sinha said, "We are noticing that there is a renewed optimism about the economy and about the market. Corporates who were not making investments, my impression is that they have started looking at making investments once again."

Companies that came up with an issue in FY13 have done well on the bourses post listing. The median return of these newly listed entities comes to 14.50%. Of the 14 listings (Tara Jewels is yet to list), returns on 12 are positive on a year to date basis.

Media reports suggest that an improvement in sentiment has also been seen in the grey market for IPOs. It is being said that shares of Bharti Infratel, PC Jeweller and CARE have been commanding a premium in the grey markets.

We at Dalal Street Investment Journal have undertaken an in-depth analysis of all the new issues in FY13 that have been listed on the BSE and NSE and some of the companies that intended to get listed on the BSE/NSE SME index before their issues open for subscription. This is done mainly to give investors a detailed understanding of the prospects of these companies and the risks associated with them so as to help take better decisions. We analysed a few companies that have hit the SME bourses since these stocks tend to raise small amounts and often turn low on liquidity post listing.

Of the listings in FY13 so far, we had asked investors to avoid VKS Projects for its negative cash flows, high amount of receivables, negative outlook on the capital goods industry and its high client-revenue concentration. Jupiter Infomedia was another counter where we had sounded out an avoid mainly because of its poor past performance, lack of robust future planning, inability to face high competition and uncanny transactions to boost net worth. RCL Retail was on our avoid list for its inexperienced management, poor financials and dismal performance of promoter group company.

At the same, we had recommended investors to buy Tribhovandas Bhimji Zaveri whose price has appreciated by 129.17% post listing.

To help investors take a better decision on the upcoming issues, check out our analysis by clicking here.