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Inferior Public Offerings

The crashing markets have left most IPOs suffering and even more postponed, but some have done well

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Our world is changing around us, and unfortunately, not for the better. And as far as the world of the Indian stock markets is concerned, it is witnessing nothing short of a disaster. It all started in the beginning of the year when the Sensex fell from its majestic standings to be down by 30 per cent in a mere two months. As of now, the Sensex is hovering around the 13K-14k mark, and that too with much difficulty.

One of the obvious aftereffects of this has been the dented sentiments of the Indian investor. While the primary markets have predictably suffered, the secondary markets haven't fared that well either. A number of equity offerings, even those of large companies, have taken a beating. After the withdrawal of the initial public offerings of Wockhardt Hospitals and Emar MGF in the first quarter of 2008, the issues thereafter have received mainly lukewarm responses.

The situation hasn't been any good around the world. Volatile markets around the world have seen more than $23 billion worth of IPOs being postponed. Even Indian developers like Indiabulls Real Estate, Unitech and DLF had to shelve their plans of listing their real estate investment trusts (REIT) in Singapore.

Amongst the IPOs that got listed during the past two years, a majority of them are still feeling the brunt. A total of 178 IPOs came out between January 2006 and January 2008. Out of these, as many as 98 were trading below their issue price as on 13th June, 2008. The major looser was Evinix Accessories, which was down by 89 per cent. Following Evinix were GVK Power & Infrastructure and Uttam Sugar Mills, down by 87 and 82 per cent, respectively. Even big ticket IPOs of Kishore Biyani's Future Capital Holdings and Anil Ambani's massively hyped Reliance Power were trading 47 and 57 per cent below their issue price.

However, there were IPOs that bucked the trend and came out with flying colours, 78 of them to be precise. This list was made up of names like Sel Manufacturing Company and Usher Agro, which were both trading at more than five times of their issue prices.

Moving on, the markets are still facing the music of volatility and hence, the investors can only guess how the recently concluded IPOs of Lotus EyeCare, KSK Energy Ventures, Archidply Industries, Sejal Architectural Glass and Niraj Cement would perform. A large number of companies have also postponed their IPOs, opting for external borrowings primarily because the economy is going through a difficult phase on account of high commodity prices, reduced capital inflows and high interest costs.

The number of IPOs had declined to 19 in the first five months of 2008, as against 44 in the same period last year. As per Assocham, considering this pace, the year may witness around 30-35 public offerings as compared to 101 IPOs in 2007, which for the promoters spells bad news.