Mumbai: While the broader markets are hovering around their lifetime highs, every thing is not hunky-dory for equity investors as still over 50 per cent of the initial public offers (IPO) that had hit the markets during the past three years are trading at a hefty discount to their issue price.
Out of 57 companies that had come out with public offers since 2011, the shares of 29 companies are still trading at a significant discount to their issue price. This is when compared to 79.32 per cent and 85.01 per cent gains respectively registered by the BSE mid cap and small cap index during the same period.
Interestingly, out of 29 companies, 24 companies had raised funds from the public during 2011. For instance the shares of Tijaria Polypipes are now quoting at Rs 3.59 as compared to its issue price of Rs 60 per share, a discount of 94 per cent while the shares of Prakash Constrowell is now available at Rs 3.29 per share, a discount of 97.61 per cent to its issue price of Rs 138 per share.
Without naming any particular IPOs, Kishore Ostwal, chairman and managing director of CNI Research said that the year 2011 would be remembered as black period for the Indian primary market.
“Many of the IPOs that had hit the market during 2011 came through pre-IPO fixing by some Gujarat-based operators. The prices of these stocks tumbled soon after listing and a significant number of retail investors had to incur heavy losses. That is the reason why the shares of these companies are still struggling even in a rising market,” he said.
While aggressive pricing is cited as another reason for the under performance of these companies, Jag-annadham Thunuguntla, head of equity at SMC Global Securities said that it is always better for investors to concentrate their investment on fundamentally good companies.
“Companies with sound fundamentals recover fast when the broader market recovers. This is one of the reasons why investors should do intense scrutiny before investing in an IPO,” he said.
