Mumbai: The initial public offer (IPO) market frenzy among investors — mainly the rich — is showing signs of moderating. Ketan Thakkar, a Mumbai-based investor and stock broker, is being choosy while investing in public issues these days as a spate of weak listings recently and higher funding costs have dampened his optimism about making a quick buck from these share offerings. “Now it looks like people will shy away after the recent experiences (weak listings). I will be more selective now,” he said. Khadim India, New India Assurance Co, Mahindra Logistics, General Insurance Corporation of India and Indian Energy Exchange, which listed recently, are down 3 to 14% below their issue prices. Some of them even listed at a discount. Thakkar is among the several well-heeled investors who have stayed away from recent Ipos after going all out in earlier issues. In all, the large insurance IPOs, which were launched in the last two months, the HNI portion was not fully subscribed. The HNI portion in ICICI Lombard was 0.8 times, in SBI Life it was 0.6 times, and for General Insurance Company 0.2 times. New India Assurance was the lowest with 10% subscription. Various IPOs prior to these issues were lapped up by them. The HNI portion in theRs 400-crore IPO of Capacit’e Infraprojects was subscribed a record 647 times, data compiled by primary market tracker Prime Database showed. Shares meant for HNIs in CDSL, Quess Corp and Advanced Enzyme Technologies were subscribed 392-558 times, data showed. “Expectations from HNIs are huge as companies have seen listing gains of an average of 25-30% in the last one year and if they hold on to a stock for a year, we have seen average 30-32% CAGR returns,” said Chintan Kotak, vice president, IIFL. Avenue Supermarts, the owner of supermarket chain D-Mart for example, saw its shares doubling on the listing day itself. It is up 272% from its issue price of ?299. Others like Shankara Building Products and Apex Frozen Foods are up 191% and 224%, respectively, from their issue prices. The buzz in the IPO market encouraged the government and companies, which launched their issues recently, to aggressively price their offerings. “Pricing issues have affected recent listings but that is on an IPO to IPO basis. A lot of HNIs who look at short-term returns are sceptical now as grey market premiums and listing gains have not materialised. In some, they have not even achieved break even,” said Kotak of IIFL. IPO financiers said that costing for these investors went up to as highs 30-40% over the issue prices. In recent IPOs, such as Reliance Nippon and Cochin Shipyard, the listing gains did not even cover their costs after financing. Hnis Turn Cautious on IPOs “People were lapping up whatever comes at whatever rate, especially after D-Mart and CDSL IPOs which got bumper subscription. After that people started just looking at the grey market and not fundamentals. Costing for HNIs went up to as high as 30%,” added Thakkar. Focus of these investors will now be on issues that are not aggressively priced. “The moment they (HNIs) see a good issue with pricing which is fine, they will get in again,” said Kamlesh Rao, chief executive officer, Kotak Securities.
Source: ET