IPO - DEAD MAN WALKING?

By Ruma Dubey

Last week we saw the IPO of Samvardhana being withdrawn and yesterday, that of Plastene India was called off. Poor response was the culprit for both. The jinx is 0.2; Smavardhana saw subscription of only 0.23 times and that of Plastene only 0.28 times. 

So what exactly is happening in the IPO market? There is no appetite for IPOs at all? Samvardhana did not get the required subscription as it was too expensive and Plastene, well, was a trickster. Thus investors, disenchanted with the secondary markets, do not want to take any risks in the primary market. When stocks with proven track record and sound management are going cheap, why would investors go for expensive new companies, especially now when there is no risk appetite?  At silver lining is that at least traders are keeping away from companies like Plastene, which earlier would have ‘managed’ to get filled, to become an ‘operator’ stock.  Thankfully that distasteful trend has stopped.

A look at the number of offer documents filed with SEBI for an IPO in 2012 throws up a dismal figure. From 3rd Jan 2012 to 8th May 2012, only 15 draft offer documents were filed. This includes, amongst others, Usher Eco Power, RK Infratel and more.  PSU Rashtriya Ispat Nigam is to file its DRHP with SEBI by June for raising Rs.2500 crore and it is planning on an IPO by August. One does not know if these companies would be brave enough to ahead with their IPO in the current glum market.

There are many who have allowed their approvals to lapse - Nimbus Communications, Credit Analysis and Research (CARE), Tata AutoComp Systems, Emaar MGF, Lokmat Media and Lavasa Corp. In 2011, there were 29 companies who allowed their approvals to lapse which again had big names like Lodha Developers, Reliance InfraTel, Glenmark Generics and BPTP. SEBI approvals are valid only for a year after which they need to reapply and none of these companies have reapplied yet. Though there is Goodwill Hospital and Research whose IPO was withdrawn in Jan 2012 has once again filed its offer document with SEBI on 8th May. Talk about guts and not taking “NO” for an answer!  In 2012 till now, 13 IPos have been called off which includes Micromax, Joyalukkas, VRL Logistics, Pride Hotels, Betul Oil, and Semantic Space Technologies. And in 2012, till now, only 6 IPOs have sailed through and got listed though four out of the six are trading below issue price - MCX, TBZ, NBCC, Olympic Cards while MT Educare is above its IPO price and BCB Finance yesterday closed exactly at its IPO price of Rs.25.

It is not that companies do not want funds, the list of companies wanting to raise money is huge but the problem is that demand is poor. And this is something not specific to India alone; all over the primary markets are battered. Last week, in USA, two IPOs were withdrawn and two were postponed. But there is the mother of IPOs scheduled soon – Facebook. Touted to be one of the biggest IPOs in history, it recently raised its price band from earlier $28 to $35 a share to $34 to $38 a share. Now this one issue which will set the trend, might help revive the markets there if it does well, on listing too.

That is probably what we also need – a good, fundamentally sound company with an IPO which is reasonably priced. Now that sounds almost like a myth, a figment of our imagination. Investors have the cash and will invest if the offer is good. But we need one such solid company which will have the courage to break the jinx. Is there anybody out there?