The Hindu Business Line : Will IPOs power on?

With the Reliance Power stock making a lacklustre debut and languishing below its offer price ever since, has the sheen gone out of the primary market? It would be too early to conclude that. True, events of the past week may drive short-term speculators, who were in the market mainly for flipping gains, out of the game for some time to come. This may dramatically trim the over-subscription numbers that IPOs have sported in recent months. Recent IPO failures may also reduce the IPO pipeline, as offerors with a limited track record rethink their plans. But all this may actually be good for serious investors in the primary market.

With overall subscriptions moderating, the odds of a retail investor being able to get allotment in an IPO of his choice may go up. Investors may no longer have to put in bids for several times their requirement, to bag allotments in an IPO. They may no longer have to take recourse to leverage to bag allotments to a fancied offer. With the market in a more cautious mood, offerors too may be forced to price their offers more realistically; leaving more on the table for investors in the period after listing. In this context, it is healthy for the market that a quality offer such as that from Rural Electrification Corporation is the first big IPO to test the waters in this turbulent environment. The offer is backed by sound fundamentals and reasonable pricing and may be just what is needed to shake primary market investors out of their pessimistic mood.

AARATI KRISHNAN

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