Mumbai: Shares of Bharti Infratel Ltd, the telecom tower operator controlled by India’s biggest phone services company, tumbled on their trading debut on Friday, but analysts said its performance isn’t likely to hit a revival of investor appetite for stock sales in the New Year.
The shares fell 13.1% from the offer price of Rs.220 to Rs.191.20 at close of trading on BSE on a day the benchmark Sensex index gained 0.63% to 19,444.84 points. The stock fell as much as 14.3% in intraday trading as investors rushed to sell.
Bharti Infratel, a unit of Bharti Airtel Ltd, raised Rs.4,118 crore in the biggest initial public offering (IPO) in India this year. The company raised more than six times the Rs.663 crore of shares sold by Multi Commodity Exchange of India Ltd in this year’s second biggest IPO.
Market participants blamed the high pricing for its listing at a discount.
“There was nothing much left on the table for the investors,” said Prasanth Prabhakaran, president of retail broking at India Infoline Ltd. “Large issue size was also a disadvantage for Bharti as IPOs with smaller issue size were around.”
Bharti Infratel was the third company to list on the stock exchanges this week after creditor assessor Credit Analysis and Research Ltd (CARE) and PC Jeweller Ltd. CARE shares listed at a premium of 23.6% to their offer price, and those of PC Jeweller at a 9% premium.
Unlike the CARE IPO, Bharti Infratel, 86% owned by Bharti Airtel, failed to attract retail investors. It sold shares at Rs.220 to funds and wealthy investors; retail investors were offered shares at Rs.210.
The company had raised nearly Rs.652 crore from 18 anchor investors at Rs.230 per share ahead of its IPO.
Anchor investors include Columbia Acorn International, Wanger International, the Riversource Variable Series Trust, Wellington Management Co., AllianceBernstein Global Thematic Growth Fund Inc., Morgan Stanley Mauritius Co. Ltd and Citigroup Global Markets Mauritius Pvt. Ltd.
Morgan Stanley Investment Management, Clough Capital Partners LP, Commonwealth Equity Fund Ltd, Route One Investment Co. LP and Sundaram Mutual Fund also bought the shares.
Bharti Infratel is India’s first telecom tower company to go public, and the poor investor response could dampen investor response to plans by other telecom infrastructure firms to raise funds.
But its unhappy debut isn’t likely to have an impact on the overall IPO market, said Prabhakaran, who reasoned that the relatively smaller size of the CARE and PC Jeweller IPOs worked in their favour.
“The interest has come back. The markets have fared well in last three-four months. We could see more share sales coming up,” said Prabhakaran.
While optimism is returning to the IPO market, only companies with valuable brands and those that pass the test of quality will attract investors, he said.
Twenty-four IPOs collectively raised Rs.6,953.3 crore in 2012—the second lowest since 2003, when companies selling shares for the first time raised Rs.2,013.06 crore.
Market sentiment has been weak for most of the year and began improving only in September when the government started its economic reform push by opening the doors to foreign direct investment in multi-brand retail.
In 2011, Rs.6,128.50 crore was raised from 38 IPOs—the lowest in nine years—as the Sensex shed around a quarter of its value. This year, the Sensex has risen close to 25%.
Out of the 24 IPOs this year, 80% were trading above their offer prices as of Friday’s close. Out of the 38 share sales in 2011, only 15 were trading above their issue price.
“The post-issue performance of shares that got listed this year has been reasonably good as pricing was conservative due to bad market conditions,” said Prithvi Haldea, managing director of Prime Database, a Delhi-based primary market tracker.
Analysts expect a flood of share sales in the next few months if market momentum is sustained.
Qualified institutional placements—share sales to institutional investors—and offers for sale—similar to selling shares on the exchanges through auction—will dominate other fund-raising routes as they are faster and cost effective, although most sales are likely to be in the range of Rs.200-500 crore, according to Tarun Kataria, chief executive officer of Religare Capital Markets Ltd.
Most analysts expect the Sensex to cross the 20,000 mark and rise even higher as the worst for the Indian economy seems to be over and corporate earnings are expected to improve. Lower borrowing costs and a push for fiscal reforms by the government are expected to lift investor sentiment.
The government’s push for share sales by public sector undertakings will also buttress the positive sentiment, analysts said.
Tyre Corp. of India Ltd, Hindustan Copper Ltd, Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd and Bharat Heavy Electricals Ltd are up for share sales, according to the disinvestment ministry’s website. Separately, government officials have mentioned plans to divest stake in Oil India Ltd, Hindustan Aeronautics Ltd, National Aluminium Co. Ltd, NTPC Ltd and MMTC Ltd.
Anirudh Laskar contributed to this story.