New Delhi: To apprise investors and general public on criticism regarding over priced flooding in initial public offers (IPOs) in recent times, Assocham clarified that this is far from true and that several IPOs provided dream returns, including Tech Mahindra (299%), GMR (85%), Gujarat State Petronet (79%) and Sun TV (69%).
A Paper jointly brought out by Assocham and Prime Database on ‘Stop IPO Bashing’ released by Prithvi Haldea, Co-Chairman Assocham Capital Markets Committee, says that “between Jan 2006 - Feb 2007, 102 IPOs raised Rs 27,152 crore, of which, top 15 accounted for Rs 18,880 crore or 70% of the total amount.
The Paper highlights, “among 15 IPOs of the period as many as are 11 are still in the positive zone, based on market prices as on 15 March 2007. It questions as to why there has been an outcry about the huge losses inflicted by IPOs on small investors ? The four laggards are Cairn India, Parsvanath, Lanco Infratech and Indian Bank.
The report clarifies that 11 of these have given positive returns and it is time that the bogey of IPO overpricing is laid to rest. Analysts should talk about the large IPOs and not unnecessarily create a scare by quoting small, few, inconsequential IPOs.
It further states that if we were to look at all IPOs above Rs. 100 crore of this period, of the 44 IPOs, 26 are still quoting above the offer prices, despite the market crash.
It highlights that 90% scrips have seen a huge erosion in their market prices, including stalwarts like Hindustan Lever, Colgate, Gillette, Tata Tea, Nirma, Tata Motors and Bajaj Hindustan.
Why does one not point fingers at all these already listed companies or at their promoters for having brought losses to investors? It is patently unfair to expect IPOs to quote above their offer prices at all times and always better the market.
The report advises that it is important not to place IPOs on a pedestal and expect them to perform well indefinitely. IPOs are a risky form of investment and while some will deliver, others may not. That is the nature of business and equity investing.
The chamber emphasises that except for a very small number of IPOs that listed in the post-crash period - May 2006 and February/March 2007, each IPO booked handsome profits by selling on the listing date, yielding gains of between 10-250% in just under 20 days.