The Hindu Business Line : Market mayhem takes a toll on IPOs

The mayhem being witnessed by the secondary market in the last 10 days seems to have shaken the confidence of the investors in the primary market with very low subscription being recorded in the four issues now open.

It is the Air Deccan public issue that is likely to take the hardest knock since it is the biggest in terms of size (Rs 370-430 crore) among the issues now open.

Gangotri Textiles Ltd (GTL), whose follow-on public issue was priced at a substantial discount to the market price of the share when the issued opened, saw even the portion reserved for the employees not receiving any application till 1 p.m. on Saturday. This issue closes on Tuesday.

Institutions disinterested

Though the number of shares reserved for qualified institutional buyers (QIBs) by GTL was 58,34,146, FIIs were the only category to apply under this segment till 1 p.m. Saturday for 12,00,000 shares.

There was no bidding by domestic FIs and mutual funds. There was also no bidding from non-institutional investors such as corporates and individuals (other than retail individual investors) though 17,51,220 shares were reserved for them.

Under the RIIs category, as against the 40,85,366 shares reserved for them, the number of shares applied for was only 3,47,000.

Surprisingly, against the 4,02,439 shares reserved for employees, there was not a single application till Saturday 1 p.m.

The portion reserved for the existing retail shareholders (13,41,463 shares) also did not receive any application as per the data available in the NSE Web site.

Different story in Unity

In Unity Infraprojects Ltd (UIL) against the 16,71,500 shares offered/reserved for QIBs, the FII subscription itself at 20,05,191 was higher than the portion earmarked for QIBs.

The number of shares applied for under non-institutional investors' category was a mere 144 against the 5,01,450 reserved under this head and the number of shares applied for by RIIs and employees was very negligible.

The meltdown in the secondary market seems to have taken a toll on the issue of Deccan Aviation Ltd (DAL) which had offered 2.45 crore shares Here too, the number of shares bid for under QIB category was less than 10 per cent at 9,00,025 shares as against the offer of 1,22,73,000 shares.

While the non-institutional investors category attracted applications for only 1085 shares (on offer 36,81,900), the subscription from RIIs was also just about 10 per cent of the shares being offered for this category — 9,57,740 shares against 85,91,100 shares being offered.

Rathi Udyog Ltd's issue also faced a similar situation — there was not a single share for which application was made against the 58,00,000 shares reserved for the QIBs.

The non-institutional investors — corporates, individuals (other than RIIs) and others had applied for a total of 3,87,700 shares against 17,40,000 shares reserved under this category.

The response from retail individual investors was dismal. Only 21,700 shares were applied for though 40,60,000 shares had been reserved for them.