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.
IPO: Languishing markets - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 24, 2000

    IPO: Languishing markets

    The technology meltdown on the bourses has taken its toll on the primary market. Thought the number of companies which tapped the primary market for raising money have shown a positive trend, the total money mobilised has dropped considerably.

    During October 2000, just seven companies tapped the IPO (Initial Public Offering) market to raise Rs 1,032 m. This, when compared to the corresponding period of the previous year has come down drastically by 85%. The sharp fall in the valuations of the software scrips has dampened sentiment in the primary market as well.
    Company name Issue size
    (Rs m)
    Offer price
    Balaji Telefilms 364 130
    IT&T 317 81
    Vision Organics 174 40
    Prosoft Systems 85 10
    Synfosys Business 38 10
    Oasis Infotech 33 10
    Essemm Information 22 10
    Total 1,032 42*

    * average price

    Oversubcription rates have to started to languish with investors becoming wary of software IPOs in particular. For instance, in October 1999, public issue of Hughes Software received tremendous response from investors (oversubscribed 40 times the issue size). But in October 2000, book building issues from both media companies i.e. Balaji Telefilms and Creative Eye managed to sail through (with just one time oversubscription to their issue size). The fixed price portion of IT&T Limited, on the other hand, devolved by a huge margin and ultimately, the underwriting lead managers were forced to subscribe to it. This, despite the fact the company had a sound revenue model and a good management.
    (Rs bn) Oct-99 Oct-00
    Public issues 6.8 3.5
    Rights issue 0.7 0.1
    Private placements 27.3 10.6
    Overseas floatations - 6.1
    Total 34.9 20.2

    Leave alone public issues, the markets do not seem to show any mercy for other means of finance also. Money mobilised from the primary market (comprising public issue, rights issue, private placement and overseas issues) have dropped by 42% to Rs 20 bn (Rs 35 bn in October 1999). Receipts from rights issue and private placement alone have dropped by 61% and 91% respectively in October 2000. However, the US$ 135 m American Depository Receipts (ADR) from Wipro prevented the total receipts from the primary market from a sharp fall.

    Even SEBI's amendment of quarterly disclosure of utilisation of funds by companies who raised money via public issues, has not boosted investor confidence. The tech meltdown seems to have taken its toll on the primary market. Who is to blame for this? The investors or the companies!



    Equitymaster requests your view! Post a comment on "IPO: Languishing markets". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    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 23, 2017 (Close)