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IPOs: The changing trends

Aug 3, 2000

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 NameOffer Period Offer
Price (Rs)
Current
Price (Rs)
Gain/Loss
(%)
The Toppers
Sankhya InfotechMar-00 10 85 747%
Cybermate InfotecFeb-99 10 82 720%
Vantel TechnologiesApr-00 10 67 575%
Subex SystemsJul-99 75 408 444%
Kashyap Radiant SystemsAug-99 10 48 381%
Fortune InformaticsSep-99 10 47 372%
Hughes Software SystemsOct-99 630 2,687 326%
Times BankJul-99 10 42 316%
S Kumars.comNov-99 10 41 305%
Logix MicrosystemsOct-99 20 73 263%
Television EighteenDec-99 180 571 217%
Pentagon Global SolutionsFeb-00 12 37 212%
Polaris SoftwareAug-99 210 590 181%
Software Technology Group InternationalDec-99 66 177 168%
Sibar Software ServicesJan-00 10 26 160%
The Laggards
Ajanta PharmaFeb-00 225 163 -27%
Mascot SystemsMay-00 480 326 -32%
Shree Rama Multi–TechFeb-00 120 79 -34%
Elder PharmaceuticalsFeb-00 110 69 -37%
Integrated HitechDec-99 10 6 -38%
Omni Ax SoftwareApr-00 15 9 -40%
Cinevista CommunicationFeb-00 300 177 -41%
Fore C SoftwareMar-00 16 9 -45%
Archana SoftwareApr-00 20 11 -46%
Softpro SystemsMar-00 85 46 -46%
Cadila HealthcareMar-00 250 133 -47%
Telesys SoftwareFeb-00 15 7 -51%
Vintage Cards and CreationsOct-99 225 105 -53%
Helios & Matheson information TechnologyNov-99 50 23 -54%
Bangalore SoftsellApr-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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