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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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