Recent Trends In IPOs

It seems that the Indian equity markets are back in the reckoning again. While the secondary markets are already witnessing a strong up-move (up 25% on a YTD basis), this is now followed by the primary market too. The subdued scenario on the IPO markets in the first half of the 2012 has changed in the second half of the year, with a good number of companies tapping the primary market. This includes some big names like Bharti Infratel, CARE, NMDC and also some other names like PC Jeweller and Tara Jewels. Including these, there were around 25 companies that tapped the market.

However, not all of them could sail through easily, and some companies like Plastene India had to withdraw their IPOs on account of poor performance. The divestment of Rashtriya Ispat Nigam (RINL) has also been deferred by the government. While these companies found it difficult to get subscribed and had to be withdrawn, the others that sailed through witnessed some similarity in the way they got invested when the issue was open for subscription. All the IPOs witnessed a poor response in the initial days of issue opening, and it was only on the final day that the issues were oversubscribed. This holds true for smaller issues like those of Thejo Engineering, VKS and Plastene as well as for bigger names like TBZ, Specialty Restaurants, CARE and PC Jeweller.We tried to look into the impact of the same on the listing price and tried to analyse how these issues have fared after listing. When we collected the data, we were quite surprised to see that except for three (listed) companies Thejo Engineering, Tara Jewels and RCL Retail that were in the negatives, the other issues were in the positive zone. Some companies like VKS Projects and Max Alert System (SME Listing) provided returns of over 200%. Even Monarch Health Services (another SME Listing) given returns of more than 100%. Among the large IPOs, TBZ has yielded strong returns of 102%.

It is clear, then, that only the fundamentals of the counter that impact the share price and not the issue subscription style. Hence, we request investors to focus on factors like the quality of the management, financial performance, objectives of raising funds and last, but not the least, on the valuations part. We, at DSIJ, are continuously trying to guide the investors on these fronts through our IPO analysis column through articles on our website as well as in the DSIJ magazine.