The Hindu Business Line : Several shares trade below issue price in bullish market

SHARES of several companies, which had gone for public issues in the last six months, are quoting below the issue price. Though some of these companies are smaller in terms of the market cap, their issues were oversubscribed, signifying keen investor interest.

According to analysts, the sustained bullish trend in the equity market prompted already listed companies to price their issues close to the market prices, which had run up prior to the opening of the issues. These are now quoting below the market price.

An analysis of some of the issues that hit the market in the last six months shows that IPOs and follow-up issues (from listed companies) are trading at a discount to the issue price from 3 to 45 per cent.

Some issues are trading at the issue price or marginally above the price.

This is despite the secondary market doing well during this period.

However, many issues have given good returns to the investors in the same period.

Stocks that are trading below the issue price include Nandan Exim, HT Media, Uniply, Jindal Poly Films and Talbros Automotive.

`Check past performance': Mr Prithvi Haldea, Managing Director, Prime Database, an independent primary market monitoring firm, said several of the issues were from already listed companies and investors should look at the past performance of the stocks of these companiesbefore investing in them."In follow-up issues, the stock price goes up before the issue hits the market and then the issuer prices the shares close to the market price," he added. "Investors should be careful while investing in public issues."

Hype: In the case of IPOs, Mr Haldea said except for HT Media, other stocks are from small companies and are not a cause of concern. Some brokers cited the hype created by the over-subscription of public issues, which attract a lot of gullible investors to the primary market.

However, Mr Haldea said the hype surrounding over-subscription would die down now due to the changes in SEBI guidelines. As per the new guidelines, institutional investors will have to pay a margin while applying for IPOs and the allotment to them will be on proportionate basis rather than discretionary. "Now, there will be serious bids," said Mr Haldea. He also expects issuers to be more cautious with the pricing of stocks.

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