IPO MARKET - THIS IS WHERE ALL THE ACTION IS!
By Ruma Dubey
The IPO listings have been given some great returns to investors, the only anomaly being ICICI Prudential, which got listed much below the IPO price. The company made a disappointing debut at Rs.319 on the BSE v/s IPO price of Rs.334 and continues to wallow in the red. Here, the HNIs subscribed to the kings portion - subscribing 28.55 times, followed by QIBs at 11.83 times. Retail investors subscribed just 1.42 times.
Even HPL Electric, which got listed last week had a very muted debut. The IPO which closed on 26th Sept had priced its stock on the upper price band of Rs.202 got listed on the BSE almost 6% lower at Rs.190. Here, HNI were the biggest subscribers at 22.20 times, followed by QIBs at 5.77 times and retail was small at 3.31 times.
Prior to that GNA Axles made a smashing debut. It got listed at Rs.248.50 on the BSE v/s offer price of Rs.207, a premium of 20% and since then came off the listing price. Here too, HNI’s took away maximum, subscribing 217 times while retail investors was at almost 12 times.
L&T Technology Services got listed on the BSE at Rs.900 and this was at a 5% premium over the issue price of Rs.860/share. This issue from the stables of L&T has got subscribed 2.52 times, receiving bids for 1.83 crore shares.
RBL Bank also made a grand entry – as against the issue price of Rs.225, the stock got listed at Rs.273.70. The IPO, the first from a private sector bank after a decade had got a resounding response. The Rs.1213 crore IPO was subscribed 69.62 times. The stock price has since then risen, remaining much over IPO price.
So as we can see, majority of the IPOs have four things in common – they list at a premium to the offer price; HNIs are the biggest subscribers, Retail participation is better than before though remains low and they all meet with great response, always oversubscribing.
The inference which one can draw from the performance of these IPOs is that investors surely have the appetite for good quality IPOs. That is a big change now – there is no riff raff as such; most come from established stables and are of reasonably good quality. With most quality stocks going out of reach of investors or quoted at prices which leaves very little on the table, investors are on the lookout for new opportunities and IPO markets are most certainly the preferred destination.
The other big trend which we are seeing emerging is that High Networth Individuals (HNIs) who are categorized under ‘Non-institutional investors’ are going ga-ga over the IPOs. The retail interest remains subdued. Those on the Street say that this love for IPOs is nothing new, started way back when the issue of Wonderla happened and continues till today. HNIs are not long term investors, they are mainly there for listing gains.
HNIs modus operandi is simple – they buy in huge amouns to maximize their chances of allotment and making a killing on listing. They borrow money for short term and with rates not as high as before, they place huge bids for the IPO; today the rates have come down from 9.5 to 10% to around 7 to 7.25%. Thus to some extent, we can say that as interest rates fall, rush by HNIs for IPOs will only increase. They are usually funded by NBFCs. And for them too, the multiplier effect works – the more they borrow, the lower is the interest rate at which the NBFC gives them money.
Looking ahead, as per the data now with SEBI, some 16 companies have got the nod for their IPOs with one-year validity. SSIPL Retail, BharatMatrimony.com, VLCC Healthcare, GVR Infra, Paranjape Schemes, Center for Sight, Hinduja Leyland Finance, Seaways Shipping, Varun Beverages. And those currently having filed their draft offer and awaiting SEBI approval are BSE, Avenue Supermarkets, Security And Intelligence Services, Sheela Foam of Sleepwell brand fame, PNB Housing Finance, IRB Inv IT Fund, Laurus Labs, Continental Warehousing Corp. NS Ltd, Genesis Colors, Shankara BuildPro, Avenue Supermarts Ltd and GR Infraprojects.
Yes, the IPO or primary market is doing well and in the coming days, as we explained, if interest rates go down, it will only do better. This is where all the action will happen….