INVESTOR apathy towards new listings continues as seen from the decline in the shares of most of the companies that debuted on the bourses this month.
Four of the five initial public offerings (IPOs) listed in the past three weeks are quoting at a significant discount to their offer prices. These companies are Pradip Overseas, Shree Ganesh Jewellery House, Intrasoft Technologies and Goenka Diamond & Jewels.
However, Persistent Systems is quoting at a 26% premium to the offer price.
According to merchant bankers, investors remain wary of new share offerings after many high-profile offerings in the previous months fared poorly. In addition, over-pricing of public issues is also a key reason for the underperformance, they said.
“Market perception about some of the latest IPOs may not have been positive because of their unimpressive industry background. This could have prompted investors to take a cautious view on investing in these companies,” said Jinesh Mehta, executive director, Saffron Capital Advisors, a Mumbai-based merchant banking firm.
Out of the five, Shree Ganesh Jewellery and Goenka Diamond & Jewels are into jewellery, a sector which traditionally attracts low discounting in the market. Pradip Overseas is a textile firm, again a sector on which most investors are bearish because of the rising rupee.
There could be many other existing companies in these industries available at much cheaper valuations than the new players, said Mr Mehta.
Some bankers also blame aggressive pricing as one of the factors behind the disappointing performance.
“A few issues were priced aggressively which prompted retail participants to stay away at the time of offer and also after listing,” said Almondz Global Securities investment banking head Sharad Rathi, without commenting on specific IPOs.
He also said many high net worth investors (HNIs) could have exited their investments on the day of listing, thereby putting pressure on the stock prices.
A look at the allotment data of the five IPOs shows that they attracted large HNI subscription while retail participation was comparatively lower.
For instance, Goenka Diamond & Jewels saw non-institutional subscription (including HNIs) of 2.7 times compared to 0.5 time retail subscription. The stock listed on Friday at Rs 130 against the offer price of Rs 135 per share. It fell sharply on Monday but recovered some ground to close 3.2% at Rs 118.
Shree Ganesh Jewellery House is another stock which is currently trading much lower than its offer price. At Tuesday’s close of Rs 153.5, the stock was quoted at a sharp 41% discount, reflecting lack of interest among investors post listing.
The ShreeGaneshIPO received non-institutional subscription of 3.9 times while the retail portion was subscribed 1.2 times. The QIB subscription level stood 1.4 times. The company reported a net profit of Rs 50 crore on a turnover of Rs 871 crore in the quarter ended March 31, 2010 while the figures stood at Rs 168 crore and Rs 2,956 crore, respectively for FY10.