Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tale of two IPOs… - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 8, 2008

    Tale of two IPOs…

    Or rather three. One that evoked so much fervor recently that investors stomped over one another to apply to the same. And two - the latest ones - that have been unable to find many takers despite lowering their offer prices and extending subscription dates. One out of these latest two, Wockhardt Hospitals has in fact pulled out its IPO for lack of response from applicants. The company will be refunding money in 15 days time to those who have applied to the issue.

    Apart from weak market sentiment, one of the key reasons for poor response to these two IPOs (the other being of real estate developer, Emaar-MGF) has been 'high valuations' - an issue that had seemingly lost its relevance just a couple of weeks back, when the going was good. Valuations were, in fact, not even talked about as investors poured in applications for getting pie of a company, which did not have even a single rupee of business earnings. Investment bankers turned sellers of dreams, prophesizing about the listing day gains of this IPO. The issue was still oversubscribed more than 70 times. And then, all fell down.

    The global market turmoil, that impacted Indian stocks as well, led to the same applicants running helter skelter to issue stop payment requests to their banks for the cheques that were issued for applying to this IPO. Many succeeded and many didn't. Anyways, the company has allotted its shares and plans to list during the next week. And now, there are permutations and combinations made out for the listing price. Some commentators have even gone on to say that the listing price of this issue will determine the course of Indian stock market!

    In the meanwhile, the promoters and lead managers of the second ongoing IPO - Emaar-MGF - have extended the issue closing date by four more days after having revised the offer price band two times. While the issue might not receive any meaningful amount of incremental subscription over these four days, the issues with respect to overpriced IPOs and overpaid investment bankers a.k.a. dream sellers have reared their heads again. And it is good for retail investors, considering that this bunch has been taken for a ride time and again in the past.

    The concerns surrounding the secondary markets might fade away, and the heydays of overpriced IPOs might come again, but it is for you, the retail investor, to have a proper understanding of the risks that you are taking while investing in the same (IPOs or listed stocks). It is pertinent for you to carefully analyse -

    • the business of the company and its past performance (if it exists!)

    • its promoters and their experience (and how have they treated minority investors in the past),

    • the objects of the issue (where will the IPO money get invested and the expected returns on the same),

    • the pricing of the issue (by comparing it with valuations of the company's peers) - do not go by the prospectus as far as competitors' valuations are concerned; do an independent analysis.

    "Caveat emptor - buyer beware" This should be the watchword for investors. Any company may opt for an IPO. But, ultimately it is your hard-earned money that could get diverted into unproductive investments, which may not give you the required returns in the long run.



    Equitymaster requests your view! Post a comment on "Tale of two IPOs…". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Were You Lured By Mr Market's Bait? (The 5 Minute Wrapup)

    Aug 23, 2017

    Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?

    Deep State First (Vivek Kaul's Diary)

    Aug 23, 2017

    Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.

    Why Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    Think Twice Before You Keep Money In A Savings Bank Account (Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 24, 2017 10:21 AM