Life After IPOs

With the secondary markets witnessing an up-move (Up 25 per cent in CY11), the primary market too, which was quite dormant for some time, has come to life again. As leading equity indices moved upwards the number of companies tapping the primary market has gone up steadily. This is what normally happens when the times are good.

There was a time, when the investors made a killing by investing in IPOs which came in floods to take advantage of a rising market. However, the scenario has changed, and over the years, returns on IPOs have moderated considerably. In some cases, investors have seen their wealth get eroded significantly after having invested in IPOs. As a result, the craze about investing in IPOs has subsided considerably.

Recently, three major companies; PC Jeweller, Bharti Infratel and CARE raised money through IPOs and got listed on the bourses. Here is what they have been doing on the bourses after being listed.

PC Jeweller

PC Jeweller tapped the primary market to raise Rs 609.30 crore in the month of December 2012. The price band at which the company raised money was between Rs 125-135 per share. The issue was priced well with something left on the table for investors. It got oversubscribed by 6.86 times and the final issue price was fixed at Rs 135 per share. However, one has to remember that, the issue got oversubscribed, but only on the last day – a trend which has been in place for quite some time now. Another noticeable factor is, it was the demand from Qualified Institutional Buyers (QIB) and Non Institutional Investors (NII) that helped the issue to go through well.

On December 27, 2012 the scrip got listed at a premium and closed the day at Rs149, providing gains of 10.37% on listing day. The scrip is now trading at Rs 151 and still providing returns of more than 11 per cent on subscription rates.

In our new issue analysis we had recommended a buy on the IPO with a long term perspective in mind. We stand by our stance and recommend that, Investors with a long term perspective can still hold the scrip.

CARE

The CARE IPO was in the news since the opening of the issue. In a scenario, where most of the other issues were actually witnessing a dull response, the CARE IPO got oversubscribed by 41 times.

While the NII portion got oversubscribed by 111 times, QIB was next with a 46 times over subscription. Even the retail portion got oversubscribed 6 times.

The offer price was in the range of Rs 700-750 and on account of the magnificent response from all segments the issue price was set at the higher end of the price band at Rs 750.

We had recommended that investors should invest in this counter considering that there was much value for in store even at the higher price band. On 26th December 2012, CARE got listed on the bourses at a premium of 23 per cent. The Scrip is still trading at Rs 915 providing good Returns. However, with all fundamentals mentioned in our analysis being in place we recommend that you hold on to the scrip with a long term perspective.

Bharti Infratel

Ever since the day it filed its DRHP, Bharti Infratel has been in the news. Be it the delayed tapping of the primary market after filling the DRHP, or being India's largest IPO in 2 years or for that matter even for the higher valuation it asked for. Bharti always made it to the news. The momentum of staying in the news remained even when the issue opened up for subscription. The poor response from the NII and retail segment, which got subscribed only 0.29 times and 0.19 times respectively was something that made to the headlines very quickly. It was the QIB that came in as a face saver for the company. This segment saw a 2.84 times oversubscription taking the overall subscription to 1.30 times. With such a mute response to its issue, the issue price settled at Rs 220 (Offer price of Rs 210-240).

We had categorically stated that, investors with a high risk appetite and long term investment horizon should invest in this scrip. We had also added that, Investors need to be cautious before jumping into the ship looking for short-term gains from Bharti Infratel. The opening of the scrip on the bourses was quite dull. Shares of the company opened at around a 10 per cent discount and then settled at Rs 191.

We still stand by our stance of the long term story in the counter and recommend investors to hold it at current levels.  In a recent development, FTSE reported that Bharti Infratel would be added to FTSE Large Cap Index with effect from January 7, 2013. The stock will also be added to FTSE All-Emerging Index, says the FTSE website. We feel, it provides some solace to investors and even an additional reason to back our long term expectations on the company.

The above analysis of three listed entities clearly indicates that, there is no dearth of investors if the issues are offered at fair valuations. CARE and PC Jeweller clearly vindicate our stand on this matter.