Investors avoid IPO fundamentals; look for quick gains

Most of the IPOs in the recent past have been oversubscribed, despite being assigned average grading by ratings agencies

It is the same story again. Indian investors do not really bother about grades for initial public offerings (IPOs) before investing when the market is hot. And then they invariably regret. As many as 23 companies have gone public since January 2010. Of this, a total of 20 companies have been rated IPO Grades ‘2’ & ‘3’ by ratings agencies, Credit Analysis & Research Ltd (CARE), ICRA Ltd and Credit Rating Information Services of India Ltd (CRISIL). Of this, 11 have been graded ‘3’ and nine have been graded ‘2’. Almost all these issues have been oversubscribed. Just two IPOs have managed to get a grading of ‘4’ indicating ‘above average’ fundamentals.

The IPO grades are assigned on a five-point scale from ‘1’ to ‘5’. An ‘IPO Grade 5’ indicates ‘strong fundamentals’ and ‘IPO Grade 1’ indicates ‘poor fundamentals’.

An ‘IPO Grade 5’ is rarely assigned to a company. The grading is assigned on the basis of a number of factors like the company’s financial performance, its track record, managements’ qualifications and experience, business prospects and corporate governance practices.

“If a fundamentally poor company is available at a cheap price then it can be an attractive investment. IPO grade talks about the fundamentals of the company without commenting on the price. NTPC is fundamentally a very good company but if it is priced at Rs300 then it will not be suitable for investors. If the same company with weak fundamentals is available at Rs100 then it can be a good investment opportunity for investors,” said a top official from CRISIL.

Mandhana Industries Ltd and Jaypee Infratech Limited (JIL), which are set to debut on 27 April 2010 and 29 April 2010 respectively, also appear in the IPO Grade category ‘3’. The hydroelectric power generation company Satluj Jal Vidyut Nigam Ltd, a public sector unit (PSU) has been assigned ‘IPO Grade 4’. None of the IPOs have got a grading of 5/5.

“Most of the IPOs that have come recently have yielded some returns to the investor, irrespective of the grading. Lay investors base their decision on the grey market prices rather than the IPO grading. It’s a pleasant fact or a pleasant coincidence that the market has been on a bullish trend since January,” said Alok Churiwala, MD, Churiwala Securities Ltd. “Institutional investors generally don’t rely on third-party assessments. They have their own wherewithal within their organisation to assess how good or bad an IPO is,“ added Mr Churiwala.

According to CRISIL, ‘IPO Grade 2’ means that a company has ‘below average’ fundamentals. Tarapur Transformers Ltd, which hits the market today, has been assigned ‘IPO Grade 1’ by CRISIL, which indicates 'poor fundamentals’. Infinite Computer Solutions (which was available at a price band of Rs155-Rs165 per share) which was assigned ‘IPO Grade 2’ was subscribed 43.22 times while Vascon Engineers Limited (Rs165-Rs185 per share) which was assigned ‘IPO Grade 3’ was subscribed 1.21 times.

(With additional inputs from Rudreshwar Malkani)




7 years ago

Again, investing based on grading, is as equal as trowing the dice n investing. The grading is valid for a limited period ie till all the connected work gets over. Is valid eg for Goenka jewel or Nitesh Estates etc till the next h.yly eresults are out? Do ur own study
that is the best way.

Unique Identification Number project gets new name, logo

The first 16-digit number under this project will be rolled out by February next year

The government’s ambitious unique identity project aiming to give a 16-digit number to all citizens of the country was today renamed ‘AADHAAR’ and its new logo unveiled, reports PTI.

The Unique Identification Number project of the Unique Identification Authority of India (UIDAI) chaired by Nandan Nilekani was renamed ‘AADHAAR’ (foundation) as part of the government’s efforts to “reach out to the common man.”

“UID itself is very confusing. Some people call it DUI, somebody calls it IUD and so forth. So it was getting a little difficult to explain all this various permutations, combinations of this acronym,” Mr Nilekani said.

“Therefore, we wanted a name that could effectively communicate its transformational potential and its promise to residents. Something that had a national appeal that could be recognised across the country, could resonate in different languages and easy to remember and speak,” he said.

Mr Nilekani said that the same standard was also set for the making of the logo. The new logo, with a sun in yellow and a fingerprint in the centre, was also made public at a seminar organised by the UIDAI.

The logo, selected after a nationwide competition, was unveiled by Dhaneshwar Ram, a resident of Azamgarh in Uttar Pradesh, who was invited by the UIDAI to speak on the hardships faced by the common man in getting an identity at present.

The logo creator, Atul Sudhakarrao Pande, a Mumbai resident was given a cheque of Rs one lakh after his design was selected among over 2,000 entries.

Speaking to PTI, Mr Pande, who is a designer by profession, said, “My sister told me about this competition. I read through their concept notes and knew that I had to create something which is easily recognisable. Any rural person would be able to easily recognise the sun and the fingerprint.”

Mr Pande, who will turn 39 tomorrow, said, “My winning the competition is the best birthday present that I have received. It will be taken to millions of people and will be at the front of this ambitious project.”

Mr Nilekani said that the project was aimed at the underprivileged and the poor who are left out of the government’s social schemes because of lack of identity proof.

R Chandra Shekhar, secretary, department of information technology, said, “AADHAAR is the first identity project which is aiming at the poor and marginalised. Earlier all such schemes use to cater only to security but AADHAAR caters to both.”

UIDAI director general RS Sharma said that the first 16-digit number would be rolled out by February next year.



Narendra Lalchand Pasi

7 years ago

It will be great helpful to farmer and villagers to have there identity and to keep there data base


7 years ago

Pl. Pay attention towards this also (INR LOGO)
Hindustan Times Hindi- Lucknow 18 March
Hindustan Times Hindi- Lucknow 19 March

RBI to launch housing index

The central bank has invited quotations from a number of consultancy organisations for the index which will cover new construction activities in all major cities

The Reserve Bank of India (RBI) has initiated an exercise to set up a housing start-up index (HSUI) to track new residential projects in 31 major cities and measure the changes in construction activities, reports PTI.

The HSUI will cover new residential projects in all major cities including Delhi, Mumbai, Chennai, Kolkata and Bengaluru, among others, the RBI said while inviting quotations from consultancy organisations.

The RBI said that housing start-ups in a particular quarter would be estimated from the permits issued in that quarter and the various past quarters by using the rates at which the permits got converted into start-ups in the recent past.

“The periodicity of this survey will be once in three years. The agency needs to visit about 350 sites to get the details on house start-ups in each city,” the RBI said in the tender notice.

The housing index will give insights into consumer activity, as construction of new houses typically requires large investment.

“It depicts forward trends in the economy. An economy that is growing rapidly has an increased demand for housing and HSUI could be used to forecast demand for new houses,” the apex bank said.

The index would also act as an indicator of economic growth as more houses would lead to increased demand for inputs like steel, cement and credit. The data on housing would be collected for eight quarters. This data will be processed through a co-efficient matrix to arrive at the actual data.

The National Housing Bank (NHB) had last year decided to expand an index of residential real-estate rates from the five cities it currently covers to 36 cities. The index, called the NHB Residex, which is the country’s first official residential property price index, now covers Bengaluru, Bhopal, Delhi, Kolkata and Mumbai.


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