80% of IPO stocks trade at premium...

By Deepak Korgaonkar in Mumbai

Equity investors have something to cheer about from the bull run in the first half of 2007-08. The investors have seen their wealth growing by 39.6 per cent in the first half as the Sensex, the benchmark index, has appreciated by over 32.6 per cent.

Investors in the primary market were not disappointed either. The 43 initial public offers (IPOs) that have been listed during the first half of the current year have also beaten the Sensex, posting average returns of over 40 per cent over their offer prices. Twenty public issues have posted gains of over 32.6 per cent over the offer prices.

Of the 43 new issues listed on the BSE between April and September 2007, 33 are currently trading at a premium over the offer prices. Of the 33, nine have appreciated by over 100 per cent each, while 15 gained between 25 and 100 per cent and the remaining nine stocks gave returns between 4 and 25 per cent.

Orbit Corporation, Everonn Systems, MIC Electronics, Gremach Infrastructure and ICRA are currently trading at more than three times the offer prices. The market prices of Vishal Retail, Time Technoplast, Nitin Fire Protection and Allied Digital Services have more than doubled from their issue prices.

Healthy valuations, post-listing, have been attributed to the overwhelming response from the subscribers, mainly qualified institutional bidders (QIBs) and the retail participation. Of the 43 new issues, as many as 18 IPOs were subscribed by over 25 times, while the remaining 25 were oversold between 2 times and 25 times.

The public offers of Vishal Retail, ICRA, Omaxe, Central Bank of India, Take Solutions and Simplex Projects were subscribed by more than 50 times each.

The boom in the realty sector saw five realty stocks, except the IVR Prime Urban scrip, trading over their offer prices. Orbit Corporation was the largest gainer, appreciating by 378 per cent over its issue price. The company raised Rs 100 crore, pricing its shares at Rs 110 apiece. It is currently trading at Rs 526.05 on the BSE.

DLF and Housing Development & Infrastructure (HDIL) are trading at a premium over 25 per cent, while Omaxe and Puravankara Projects are quoting at 8 per cent premium each to their offer prices.

However, the market prices of ten issues have declined by over 18 per cent each. Decolight Ceramics, Insecticides, Hilton Metals, KPR Mills, Asahi Songwon Colors and Alpa Lab are currently trading over 30 per cent below their offer prices.

Of the 43 IPOs, eighteen new issues raised more than Rs 100 crore (Rs 1 billion) each from the public. The six real estate companies collectively raised Rs 12,961 crore (Rs 129.61 billion), accounting for 74 per cent of the total funds raised during the first half.

DLF, whose public issue was the largest, collected Rs 9,188 crore (Rs 91.88 billion), followed by HDIL (Rs 1,485), Puravankara Projects (Rs 859 crore), IVR Prime Urban (Rs 778 crore), Central Bank of India (Rs 816 crore) and Spice Communications (Rs 520 crore). Fortis Healthcare, Motilal Oswal Financial Services and Advanta collected between Rs 200 crore (Rs 2 billion) and Rs 500 crore (Rs 5 billion).

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Mumbai: India’s biggest-ever initial public offering (IPO) of Rs 11,700 crore ($3 billion) fell more than 13 per cent after debuting at its IPO price Rs 450 on Monday.

The much-hyped Reliance Power IPO had a disappointing listing at the Bombay Stock Exchange (BSE). At 1005 hrs IST, the shares were down 5.2 per cent at Rs 426.50, while the benchmark BSE index was down 1.3 per cent. At BSE, the stock opened at Rs 547.80, a premium of about 21 per cent before slipping to Rs 430 levels.

At National Stock Exchange, the stock was listed at Rs 530, representing a premium of Rs 80 or about 18 per cent over its issue price of Rs 450. The stock was trading 3 per cent below its issue price at Rs 435 on the NSE at 0956 hours. The stock is a part of NSE F&O, the lot size is of 450 shares and options strike priced between Rs 10-1350.

At BSE, the biggest IPO in Indian markets was traded heavily from the word go and it witnessed a lot of price fluctuation, trading consistently below the issue price, It went below Rs 400 at one point to hit a low of Rs 398 before coming back to Rs 400-410 levels. However, the stock inched towards the issue price within 15 minutes and was trading at Rs 440-447 level at 1047 hours.

The markets, as a whole, were in the red at the opening with the BSE Sensex down 230 points and Nifty shedding 120 points at the start of a new week.There have been speculations with one section of investors predicting that the biggest-ever IPO will crumble under pressure while others say it might power a recovery in the markets.

Retail investors had received allotments at Rs 430 a share, while the issue price was Rs 450 per share. The Rs 11,500-crore issue was subscribed in just one minute last month. Reliance Power is the flagship company of the Reliance ADA Group to develop, construct and operate power generation projects.

The company is currently developing 12 power projects with a combined planned installed capacity of 28,000 MW, one of the largest portfolios of power generation assets under developments. Right after the issue was closed, the market tumbled on global fears about the possible impact of the US subprime crisis.

Analysts say if the Reliance IPO overcomes the turbulence in the stock market to fetch a good premium, it could improve sentiment in the market. Last week, Emaar MGF Land and Wockhardt Hospitals had withdrawn their IPOs due to low investor response.

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