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Initial Public Offers – A review - Views on News from Equitymaster
 
 
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  • May 12, 2000

    Initial Public Offers – A review

    The primary market has witnessed a flurry of Initial Public Offerings (IPO) in the past one year. Even as select issues listed at a huge premium, some of them are trading at large discounts to offer price.

    We conducted a study to determine the top losers and gainers and came up with the leaders and laggards.

    The Top Five
    Company Name Current Price
    (Rs)
    Sector Issue price
    (Rs)
    Gain/Loss
    (%)
    Fortune Informatics Ltd 146 Software 10 1357%
    Cybermate Infotec Ltd 112 Software & Education 10 1022%
    Polaris Software 1,070 Software 210 409%
    Hughes Software Systems Ltd 2,896 Software 630 360%
    Logix Microsystems Ltd 84 Software & Education 20 321%

    The Bottom Five
    Company Name Current Price
    (Rs)
    Sector Issue price
    (Rs)
    Gain/Loss
    (%)
    Vintage Cards and Creations Ltd 66 Printing & Stationary 225 -71.0%
    Shree Rama Multi–Tech Ltd 54 Packaging 120 -55.0%
    Elder Pharmaceuticals Limited 70 Pharmaceuticals 110 -36.0%
    Cadila Healthcare Limited 163 Pharmaceuticals 250 -35.0%
    Telesys Software Ltd 10 Software & Education 15 -34.0%

    The main reason for a loss of interest in IPOs could be the volatile markets and the quality of issues that have and are hitting the market. The quality has deteriorated, especially in the technology sector, after SEBI relaxed the norms for the IPO to issue shares (it exempt technology companies from the conventional norm of three year profitability track record). This resulted in issues from companies, which neither had a profitability record nor any business operations (they were yet to set shop).

    Now that the technology bubble has been deflated, investors have begun to lose interest in the IPO market. Many companies have in fact postponed their IPOs till the markets cool down and investors gain some confidence. Whether the euphoria will return anytime soon is anybody’s guess. But, one thing is for sure. A number of these dubious offerings will continue to haunt the investors for sometime to come.

     

     

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