Poor returns from IPOs in FY 2010-11

Poor returns from IPOs in FY 2010-11

 But the investors who invested in them had to suffer as majority of the IPOs are quoting at a discount to their issue price.

Out of the 61 public issues, 4 were follow-on public issues and 57 were initial public issues. Of the 61 public issues, only 20 are trading above their issue prices while 41 are trading below the issue price. This, in other words means, investors made a gain in only 33 per cent of issues and they lost money in 67 per cent of the issues.  The highest return of 221 per cent was produced by Fineotex Chemicals which is currently quoting around Rs 224 against the issue price of Rs 70. The largest negative return of 79 per cent came from Sea TV Network that is quoting at Rs 21 against the issue price of Rs 100. (See table).

It is unfortunate that investors lost heavily though they had reposed their faith in public issues, a means to mobilise investments in asset creation. In 2010-11 Rs 46,267 crore was raised from public issues, shade lower than fund raised in the previous year.  According to Prime Data Base CEO Prithvi Haldea though the year was expected to do much better but some large PSU offerings did not take place due to continuing volatility in the secondary market, especially in the last quarter of the year.

Of course, the biggest saviour was Coal India Ltd whose highly successful IPO was oversubscribed 15 times to raise Rs 15,199 crore. It is now quoting at Rs 342, 40 per cent higher than the issue price of Rs 245. On the contrary, the much-hyped and highly oversubscribed IPO of Microfinance firm SKS Microfinance is now quoting around Rs 532 or 43 per cent lower than the issue price of Rs 985. “Barring such highlights, the memories of primary market of the financial year 2010-11 are not particularly sparkling,” said SMC Global Securities Ltd Strategist & Head of Research, Jagannadham Thunuguntla.

The response from the public to equity issues of the year was on the whole good, according to Haldea. As many as 35 issues were oversubscribed by more than 3 times. The highest oversubscription was received by MOIL at 56 times. However, two companies had to revise their price bands due to poor response and two IPOs failed due to poor response.  The public issues were seen across the industries such as power, minerals, infrastructure, banking, healthcare, realty, etc. Further, one more special feature of the 2010-11 primary market was that, the public issues came from the new-age modern industries such as Microfinance, Fitness Centers, etc.