By Ruma Dubey

The Initial Public Offers (IPOs) market is slowly but surely waking up. 2014 was not all that great though activity picked up during the last quarter. As per Prime Database, companies raised a total of Rs.45,440 crore in 2014, down 14% (YoY) but before you feel that all was not all that bad think again – 81% of this amount, which is Rs.31,684 crore was through 33 QIPs.

Truly speaking there were only six IPOs to really talk about – Sharda Cropchem, Snowman Logistics, Wonderla Holidays, Monte Carlo Fashions, NCML Industries and Shemaroo Entertainment. And these 6 IPOs raised Rs.1261 crore, the lowest in 13 years.

But things seem to be looking good as of now for 2015. Till date, some Rs.8000 crore worth of IPOs are waiting for the SEBI nod. And big names like Lavasa, Adlabs, Ortel Communication and MEP Infra have already received SEBI approvals; they are probably waiting for the “right time” to launch their IPOs. It is expected that in current Q4FY15, we could see a bevy of activity in the IPO markets and some Rs.3000 crore is estimated to be raised. Rashtriya Ispat Nigam is another IPO which recently received SEBI approval and is expected to hit the market any time soon.

Other big names which are awaiting SEBI nod are Great Eastern Shipping Energy – the company had got the approval but allowed it to lapse and has now once again filed its Draft Red Herring Prospectus (DRHP). Then there is the Rs1100 crore coal washing company ACB (India). Delhi-based stock broking firm SMC Global Securities Ltd has also re-filed its DRHP. The big one which will create a ruffle, apart from Lavasa will be Videocon D2H planning to raise up to Rs 700 crore through this offering. Mumbai-based UFO Moviez which installs satellite dishes and computer servers in Indian cinemas so they can screen digitized movies is planning to raise Rs.700-800 crore, filing its DRHP on 22^nd Dec. On the same day, goods and passenger transport services provider VRL Logistics also has filed its DRHP to raise up to Rs 142 crore. GMR Energy had filed its DRHP to raise Rs.1500 crore in April’14 but since then withdrew the issue due to “due to various business reasons”. Manpasand Beverages, maker of fruit drink 'Mango Sip', is planning to raise Rs.500 crore. India’s second largest smartphone maker, Micromax is also planning on a IPO in 2015 though it is yet to file its DRHP but it will a HUGE IPO – aiming to raise Rs.3100 crore.

As one can see, there is virtually a line-up of IPOs and that too, many which investors will look forward to. But once again, the big question is whether common people like you and me will be even able to afford these IPOs? Pricing will continue to remain the one big decisive factor. It is actually high pricing which killed the IPO market; it singularly eroded investor profits and thus the confidence. Every issue which comes out today, firstly has questionable fundamentals and yet, the pricing of the IPO is sky high. Valuations are so expensive that it has become an almost losing proposition to invest in IPOs. After the high price of the IPOs there is virtually no gain left on the table for the investors. It is more prudent to buy the stock after it has got listed as very soon, after listing, many PE funds and HNIs make an exit, bringing down the price. Yes, PE funds and bigwig investors have become mere props to lure investors to the IPO and they in turn make a quick buck, leaving the rest holding a bag full of losses.

It would be wrong to say that retail investors have lost all appetite for IPOs. Price a good issue right and sure enough, investors will flock. Take the example of L&T Finance. It came out with its IPO priced at Rs.52. Given its lineage, brand equity and fundamentals, it could have priced it anywhere and people would have still paid. Yet it chose to be truly investor friendly and priced its issue in such a way that today all are in profits. Now that is what we call integrity. How many such promoters do we come across who do not get carried away by greed?

Remember the issue of Infosys? It came way back in 1993 and shares were issued at Rs.95/share. Today even when it is not exactly at its best, it is at over Rs.2000/share.  HDFC Bank came out with an IPO in 1995 and it was priced at par, at an unbelievable Rs.10/share. It was oversubscribed 55 times! Yes, these were all issues way back when inflation and cost of living was not so high. But then are the issues of today priced right? Aren’ t they way ahead of the inflation? In fact they are adding on to the cost, raising the bar of inflation further. 

People today have the money but nowhere to invest; or rather no genuinely affordable, value-for-money avenues to invest. Companies can truly build a strong investor base, that too loyal, if issues are priced at much lower levels, allowing people to make some money. This trend of pricing issues so high is what has culled the primary market; the promoters and lead managers to the issue have killed the goose which laid the golden eggs. But we are the losers in this battle of greed and avarice.

If issues are priced at affordable and reasonable rates, primary markets will really boom. Sadly, the promoters do not seem to understand this simple logic…..or they understand but simply do not care.