The Hindu Business Line : More than two-thirds of IPO stocks rule weak

BL Research Bureau The major market crash of 2008 has literally pulped newly listed stocks. Twenty-five out of 31 new companies listed on the bourses in 2008 are trading below their issue prices. This means if someone had invested their money in ten IPOs, he/she would be sitting on losses in at least eight of them. Term it fear, panic or risk-aversion but the loss in investor faith can be gauged from the fact that the worst-hit stocks are trading anywhere between 15-81 per cent below their issue prices.

This feeling gets reinforced when you see the benchmarks correcting in the range of 30-35 per cent only. Stocks of over 20 companies have lost over 15 per cent.

Investors in companies such as Porwal Auto Components, KNR Constructions, Tulsi Extrusions, Future Capital Holdings and Manaksia will be ruing their decisions, if they haven’t exited, as the stocks are over 60 per cent down from issue prices. Only investors in IPOs such as Anu’s Laboratories, Burnpur Cement, OnMobile, Bang Overseas and Gokuls Refoils will be a bit relieved. Not only have these stocks stayed above their issue prices but are also trading with premium of 8-54 per cent. This year’s mega IPO Reliance Power has given negative returns of around 50 per cent even after allotting bonus shares.

If you are taking heart from the listing of Avon Weighing Systems on Thursday, which closed at a 20 per cent premium, that could be mistake. Its fate could be similar to that of Aishwarya Telecom. After going as high as Rs 136, the ‘buzzing stock’ tumbled rapidly. Consequently, the stock is trading at Rs 30 – a good 14 per cent discount to its issue price of Rs 35.

Aishwarya is not alone, as stocks such as Tulsi Extrusions, BGR Energy and Sita Shree – which had closed trading debut with hefty gains ranging from 50-90 per cent over issue prices – are now available at similar discounts to their issue prices! These stocks, in particular, witnessed heavy activity and huge volumes post-listing, but nobody seems to be interested now. Market observers say that ‘operators targeting new listings seem to have run out of money.’

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