New Delhi: Aggressive pricing of IPOs and Follow-on offers on the poor advice of investment bankers and managers have led to pulling out of several public issues and lukewarm listing of big-ticket shares in recent weeks, according to an Assocham Business Barometer (ABB) Survey of 150 CFOs and CEOs.
Majority of the findings stated that while the Indian stock markets have become structurally strong and well-regulated, bad pricing of issues and a prevailing weak market sentiment has played spoilsport.
India is one of the world’s largest IPO market as valuations crossed Rs34,000 crore in the year 2007, with number of companies raising IPOs exceeding 100.
* 78% respondents felt that while global uncertainties were responsible for poor response from investors, the recent debacle of public issues should not be taken as an indication of a collapse in the primary market
* IPOs can be revived if good issues hit the market with attractive and not aggressive pricing; companies which have lined up their IPOs should ensure appropriate price bands to avoid adverse investor response
* 84% felt that withdrawal of primary issues is a market phenomenon that takes place even in mature and developed markets
* Regarding role of investment bankers in failing of IPOs to invoke market response, a large section of corporate heads wanted them to give sound advice to their clients based on the market depth and the appropriate valuations of a company’s scrip
* 65% felt that besides lead managers, it is credit rating agencies that share the blame for the recent IPO debacle; rating assigned by these institutions becomes a decisive factor in formulating investor sentiment about an issue
* 72% CEOs surveyed believed that investor community in India gets swayed by market intermediaries; they blamed the so-called grey market and wanted the market regulator SEBI to come down heavily on market manipulators who raise investors’ expectations in the unofficial market
* SEBI to launch a drive against the grey market; 54% polled, were skeptical about the contribution of aggressive marketing of public issues
* Majority were not confident about conditions in IPO market; 45% said that the primary market may remain bleak for quite some time
* 56% stated it was too early to pass judgments about the prospects of the IPO market as the calendar year had just begun; given volatility in markets world over, the entire sentiment could change within a month