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HCL Tech.'s IPO smashes all records

Nov 26, 1999

HCL Technologies' initial public offering (book-built portion) of 1.3 m shares has received demand worth Rs 201 bn or 27 times the number of shares offered, making it the largest ever demand for IPO by an Indian infotech (IT) company. This was reported by a leading financial newspaper. The allotment price for the company's shares has been set at Rs 580. The company is contemplating whether mutual funds (MFs) should be given preference over other institutional investors. The company's rationale for allotment to MFs is to invite greater participation from retail investors.

The over-enthusiastic response towards HCL Tech. IPO is reflective of the mood prevailing in the stock markets at present. Software IPOs (Hughes Software, Polaris Software) have been greeted with a flood of applications. Over-subscription rates are in excess of 15-20 times, which is indicative of how eager investors are to get their fingers in the software pie.

What is even more amazing is that a large percentage of investors have no clue about what these companies actually do. Just the fact that it is a software IPO is sufficient to arouse their instincts. This is a matter of concern, as a number of companies with little or no background in software have garnered huge collections by simply appending terms like 'software' 'technology' 'systems' to their name. The market watchdog Securities & Exchange Board of India (SEBI) needs to look into this matter and take steps to guard the investors' interests.

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