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IPOs: The changing trends - Views on News from Equitymaster
 
 
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  • Aug 3, 2000

    IPOs: The changing trends

    The primary market has witnessed a flurry of Initial Public Offerings (IPOs) over the last one year. The underlying influencial factor behind this has been the euphoria surrounding information technology stocks. The iniatives taken by the government to promote the information technology sector as a whole, has revitalised the sentiment in the secondary market as well as the primary market.

    When we did the same study last month (13th June 2000), the offer price, on an average, was Rs 146 and the average current price was Rs 288, which means that on an average new issues were trading at a premium of 98% to their average issue price. Look how things have changed in a month and a half. The average offer price, currently, is around Rs 92 and the average trading price is Rs 147, at a premium of 59%! This can be attributed to the impact of the technology stocks meltdown in NASDAQ and its concurrent effect in the domestic bourses. Moreover, the Foreign Institutional Investors (FII) have been net seller for the past two months.

    Even the top gainers and losers have changed during this period. Fortune Informatics, the top gainer in our previous study, has fallen to sixth place while Vintage Cards, the major loser during the initial study, has gained three places. VSNL's share price has fallen from Rs 1,205 on 13th July 2000 to Rs 820 currently.

    Below is a list of new issues that hit the market in the last one year.

    Company Name Offer Period Offer
    Price (Rs)
    Current
    Price (Rs)
    Gain/Loss
    (%)
    The Toppers
    Sankhya Infotech Mar-00 10 85 747%
    Cybermate Infotec Feb-99 10 82 720%
    Vantel Technologies Apr-00 10 67 575%
    Subex Systems Jul-99 75 408 444%
    Kashyap Radiant Systems Aug-99 10 48 381%
    Fortune Informatics Sep-99 10 47 372%
    Hughes Software Systems Oct-99 630 2,687 326%
    Times Bank Jul-99 10 42 316%
    S Kumars.com Nov-99 10 41 305%
    Logix Microsystems Oct-99 20 73 263%
    Television Eighteen Dec-99 180 571 217%
    Pentagon Global Solutions Feb-00 12 37 212%
    Polaris Software Aug-99 210 590 181%
    Software Technology Group International Dec-99 66 177 168%
    Sibar Software Services Jan-00 10 26 160%
    The Laggards
    Ajanta Pharma Feb-00 225 163 -27%
    Mascot Systems May-00 480 326 -32%
    Shree Rama Multi–Tech Feb-00 120 79 -34%
    Elder Pharmaceuticals Feb-00 110 69 -37%
    Integrated Hitech Dec-99 10 6 -38%
    Omni Ax Software Apr-00 15 9 -40%
    Cinevista Communication Feb-00 300 177 -41%
    Fore C Software Mar-00 16 9 -45%
    Archana Software Apr-00 20 11 -46%
    Softpro Systems Mar-00 85 46 -46%
    Cadila Healthcare Mar-00 250 133 -47%
    Telesys Software Feb-00 15 7 -51%
    Vintage Cards and Creations Oct-99 225 105 -53%
    Helios & Matheson information Technology Nov-99 50 23 -54%
    Bangalore Softsell Apr-00 33 12 -63%
    Simple Average   92 147 59%
                             * Prices as on 3/8/2000

    However, considering the overall growth of the primary market for FY00, it has remained flat, with just a 1% growth in funds mobilised through various modes like IPO, rights issue, private placements and overseas issues. SIP Technologies and Exports Limited, which came out with a public issue to raise Rs 353 m during July 2000, at a price fo Rs 235 per share, had to call off their issue as the investor's response was poor. Even reports that many mutual funds have picked stakes in this company failed to trigger the investor's confidence. Companies have postponed their issue dates till the investors confidence is reinstated. How soon would that happen has to been?

    Though the average returns have fallen, it clearly reflects that, on a whole, IPOs have given good capital appreciation with the gainers to losers ratio at 1.8 times.

     

     

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