By Ruma Dubey

It was after a long time that a quality IPO had hit the primary market and it was widely expected, at least amongst the analysts that finally Adlabs was an issue which could entice the retail investor.

Sadly, that did not happen, much to the shock of most. Given the lineage and the brand equity enjoyed by Adlabs, the past track record too, one had thought that the issue would just sail through. But clearly, the primary market has not woken out of the deep slumber in which it has slipped into. Or has it?

Every issue, irrespective of the fundamentals is about pricing. People have burnt their fingers so badly in the past that they are wary of burning by a cold dessert! Many feel that the issue was aggressively priced, leaving very little profit on the table, which is the prime cause for this debacle. But arent each and every issue of today priced the same way?

The issue was to close yesterday, 12^th March but it did not get the required subscription – it did not get even 50% of the money, 44% to be more precise but it was retail investors who were the biggest investors. The party poopers were the Institutional investors, HNIs. So now the issue has been extended till 17^th March and the price band has been revised from Rs.221-230 to Rs.180-215.

The secondary market psyche at the time of the opening of the issue might have worked against the IPO. It had opened at a time when investors are jittery about US Fed hiking rates and fear that FIIs will scoot with bag and baggage from India. Last week, sentiments were extremely optimistic but the current mood is not too positive. Thus the IPO is also a victim of circumstances which were beyond its control.

Thus in many ways, this has worked well for the retail investors. There are many, who have already invested in the issue, feeling perturbed by this extension. They are feeling that they have probably backed a lame horse, expecting it to win the race. But if all fundamentals remain strong, how can this be true?

This extension really does not mean one should press the panic button. Did you know that when Infosys had gone public in Feb 1993, it had issued shares at Rs.95/share. And its IPO was undersubscribed and it had to call upon Morgan Stanley to bail it out, which picked up 13% of the equity at Rs.95/share.  The stock opened for trading at Rs.145/share, a premium of 60% over IPO price and by 1999, it had hit Rs.8100 – it was then the costliest stock listed on the bourses. Within 6 years the stock price had multiplied 85 times! And all this in a stock which did not find enough takers during the IPO.

Adlabs is not an Infosys in the making as today we do not find IPOs which are priced as attractively. We will not make as much money as one did in Infosys – 85 times profit is a thing of the past. But at the same time, Adlabs will earn you money, especially now that the price is lowered. (For a detailed analysis of the IPO go to: https://www.sptulsian.com/article/83588/adlabs-entertainment)

To invest or not is a personal decision but it is pure circumstantial that the IPO needed an extension.