Mumbai: In sharp contrast to the euphoria in the primary market, more than half of the companies, which got listed on bourses in the past two years, are trading well below their issue prices.
According to an analysis of the performance of companies listed on the Bombay Stock Exchange in the past two years, as many as 27 out of the 40 stocks studied are trading much below their issue prices, which are fixed after their initial public offers.
Meanwhile, a host of companies are rushing in to file their draft prospectus’ with market regulator Sebi for launching their IPOs as they think this is an appropriate time to enter the capital market.
Analysts said that firms in need of funds are making a beeline for the capital markets as this is a right time to raise funds with the rise in investor confidence.
On the issue that after getting listed on the bourses many of the companies are unable to sustain their issue price levels, an analyst said, “investors are still cautious and do not want to keep their funds invested in one place for a long-time and thus shuffle their portfolios after making some profits.”
Amid the stock market moving northwards and the 30-share Sensex crossing the psychological 17,000 level, the recently-launched IPO index settled down 0.41% at 1,965.70 points on the Bombay Stock Exchange on Friday last week.
The BSE IPO index tracks the performance of those companies which got listed in the past two years on the bourse.
Some of the companies which are performing poorly as compared to their issue prices include Anil Ambani group firm Reliance Power, which is currently trading at Rs160.05 or 35% below its issue price of Rs450 a share.
Other stocks which are trading below their issue prices are state-run NHPC (down 8.19% at Rs33.05 from its issue price of Rs36), Raj Oil Mills (down 37% at Rs75.45 as against issue price of Rs120).
Meanwhile, some companies have been able to sustain the high levels after listing and are currently trading above their respective issue prices.
Some examples of such stocks are Oil India (up 13.81% at Rs1,195.1 from its issue price of Rs1,050), REC Ltd (at Rs202.75, up 93% from the issue price of Rs105) and Mundra Port (which is up 22% at Rs538 against an issue price of Rs440).
Other firms which are trading higher than their issue prices are Adani Power, BGR Energy, Burnpur Cement, Gokul Refoil, Jindal Cotex and Resurgere Mines.
The IPO pipeline is flush with companies and some of the firms which have filed their draft prospectus recently include Emaar MGF land Ltd, Sahara Prime City, Glenmark Generics, Reliance Infratel, DQ Entertainment, Ambience Ltd and Lodha Developers.