The Hindu Business Line : Recent IPO stocks fall below listing levels

Shares of Patni Computers, Indraprastha Gas and TV Today, among those heavily oversubscribed earlier, were driven down in the overall decline on the bourses.

The share of Four Software, which was listed recently, was no exception.

Patni Computers on Thursday closed at Rs 212.35, below the offer price of Rs 230. The share has fallen from its high of Rs 305, touched on the day it was listed. Stocks of Indraprastha Gas, which was oversubscribed 36 times at the time of IPO, has moved down by 50 per cent from its high of Rs 165. It closed at Rs 80.45 on the BSE.

TV Today stock closed at Rs 120.50 compared with its 52-week high of Rs 225. The stock price of Four Software has fallen below the offer price of Rs 25 and today it closed at Rs 22.40 on the BSE.

Brokers said the sharp dip in the stock prices of the recently listed companies is due to the overall market fall. In addition, the over-subscription of these IPOs was more due to funding of their IPOs and did not indicate genuine interest of the investors.

"IPOs funding is mainly done by short-term traders and once they get good price on listing they sell the share," said a dealer with a domestic broking firm.

According to analysts, these issues were listed when the market was at all-time high levels and valuation of most stocks over-stretched. "When the overall market was over-valued, the listing of these IPOs was also at price higher than their valuation," said a broker.

Brokers also said that the huge oversubscription (46 times) of the IPOs of Power Trading Corporation is likely to see similar trend. According to them, several high networth individuals (HNIs) have subscribed to the IPOs by borrowing funds. Since the HNI category (or non-QIBs) category was oversubscribed 84 times, the probability of getting the shares will fall and this will increase the cost of borrowing for these investors.

Brokers said that in case the stock price list below Rs 25-26 (booking building price range of Rs 14-16), the IPO investors who borrowed funds are likely to lose and if this happens, the stock price will fall as seen in the case of Patni Computers.

Several investors lost money in Patni Computers' IPOs as their cost of funding the shares worked at around Rs 50 per share. The issue was oversubscribed 21.6 times.