MCX IPO - WILL IT BREATHE LIFE INTO THE DEAD IPO MARKETS?

By Ruma Dubey

The blockbuster movie, Agneepath, became a super duper hit, apart from the brilliant performances, mainly because of the fact that there were no other movies playing out. Those who are followers of the original abhorred the new version and are left wondering about where the world is heading. But on big reason for the movie becoming such a huge hit is also the fact that no other big ticket movie had hit the marquee when this movie released and naturally, with people parched for a choice, just grabbed onto this movie and made it the biggest hit of this year.

And this is the scenario we are seeing panning out for the blockbuster IPO of Multi Commodity Exchange or MCX. It is a sound company with a great future ( Read the analysis in our New Issue Analysis section). It has all the makings of a super hit, mainly again, like Agneepath, because there is simply no other issue which has come to the market since October. And MCVX is a big ticket IPO. After a long time, investors pining for a good quality IPO, waiting in the sidelines, finally have some issue to park their funds in. And yes, there will be a mad rush. It is sure to be a “house full!”

Just as Agneepath tickets were selling like hot cakes in the black market, the pre-IPO sales of MCX is also at a frenzy. As per reports, stock brokers are offering Rs. 3,500 to retail investors for each application of Rs.2,00,000 on their behalf. It is really after a long, long time that an IPO issue is creating these kind if ripples. Though this is good news, one should also know that the fancy for the IPO seems to have increased manifold. People have been sitting with money to invest in a good quality IPO and MCX seems to be their perfect find as of now. Thus the IPO could see huge subscriptions, leading to fragmented allotments. Higher the fancy, higher the subscription and lower is the allotment – that is the equation op good quality IPOs.

There is talk of the company getting listed at over 20% premium to the issue price. Price of Rs.1000 on listing is doing the rounds. Like an oasis in the dry, arid vast desert, the MCX IPO is like water to the parched investors. Thus huge response is a given.

The biggest plus of this IPO is that it could breathe life back into the dead IPO market. 2011 ended on an extremely dismal note. Sept 2011 saw a slew of questionable IPOs but after there was literally a famine in Oct and Nov with not a single issue and in December there was one brave hearted IPO from Goodwill Hospital , once again a dubious IPO and it was indeed a foolhardy decision as it had to withdraw its issue due to poor investor response. Out of total issue size of 35.43 lakh shares, the company received total bids for just 22,015 shares in all on the NSE and BSE combined. There were no bids from institutional investors, while the retail and non institutional investors applied for 1% and 1.83% of the shares reserved for them, respectively, making it among the worst public issues of all time.

In October we also saw the cancellation of IPO from Swajas Air Charters. Though its IPO was subscribed 1.72 times, it could not get full subscription from QIBs though it had reduced its price band and extended the closing date by a week.

 If the listing of MCX happens at a premium and sustains there, it could make way for many other IPOs which are waiting in the sidelines for the market to revive. Good issue and big issues, not the hanky-panky small, operator driven issues.

All that the IPO market needs is a few solid issues. By solid we mean IPOs from fundamentally sound companies. There remains an appetite for good issues. Investors are sitting on cash and they are on the lookout for good issues. Thus one good company needs to have the courage to break this jinx, and then the rest will follow.

Thus the IPO of MCX is important in many ways. A lot hinges on its success – post listing.