Investor Issues
MCA & ICAI’s mantra: Invest in PSU IPOs!

The Ministry of Corporate Affairs and Institute of Chartered Accountants of India’s idea of investor “education” is to tell you to invest in IPOs of PSUs! This has been a recipe of losing money

The Ministry of Corporate Affairs (MCA) and the Institute of Chartered Accountants of India (ICAI) have come out with a special edition of ‘A Beginner’s Guide to the Capital Market’. This book, dispensing investment wisdom, includes ‘20 Mantras to Wise Investing’. The 5th Mantra says: ‘Surely Invest in Every PSUs IPOs’. “IPOs are only from very good and profitable PSUs; also very little risk of fraud. There would always be a discount for the retail investors. Don't get bothered by the listing price; stay invested.”

Well, unlike the babus at MCA and ICAI fattened with money from Investor Education and Protection Fund but are totally unaccountable, Moneylife believes in checking data before coming to investment conclusions. And here is the data.

Since 2010, when this booklet was first published, five public sector units (PSUs) have entered the capital markets. However, except National Buildings Construction Corporation Ltd (NBCC), all others have performed very badly. In fact, some of them even failed to cross their listing price.


The S&P BSE Sensex hits a record high on 25th March at 22,079.96. If you had bought shares of PSUs from IPOs, which came after 2010, how much return would you have got by following “Mantra 5”?



Listing Date

Listing day
closing price

Closing price
of 25/03/2014

Returns in %
as on 25/03/2014











Coal India Ltd.










United Bank Of India





Punjab & Sind Bank






This once again proves that investment wisdom is dime-a -dozen and that you can never rely on anything that easily. For whatever its worth, we had identified the investment potential of NBCC and written about it in the Street Beat section of the magazine. NBCC: Solid Foundation. It came with an IPO two years ago. It was listed at Rs100 per share on 12 April 2012. It hit a 52-week high of Rs174.05 on 2 January 2014 and a low of Rs96.05 on 2 August 2013.


SJVN Ltd, earlier known as Satluj Jal Vidyut Nigam Ltd is Hydro-electric power PSU. It got listed on 20 May 2010 at Rs28 and closed the day 10.54% lower at Rs25.05. It made its 52-week low at Rs18.30 on 25 September 2013 and 52-week high at Rs22.70 on 25 November 2013. Till date, it is nowhere near its listing day opening price. As on 25 March 2014, its share prices were down 17.17% compared with its closing price on its listing day.

Coal India Ltd (CIL)

The largest coal producer of the world, CIL entered market with an offer price of Rs245 per share. The IPO got over-subscribed by 14.17 times. On 4 November 2010, it opened at Rs287.75 and closed 19% higher at Rs342.35. On 3 June 2013, it made 52-week high of Rs298.91 and on 30 August 2013 it made 52-week low of Rs238.35. On Tuesday it closed 1.14% up at Rs273.90 on the BSE. As on 25 March 2014, its share price was down 19.97% compared with its closing price on its listing day.


MOIL Ltd, formerly Manganese Ore India Ltd, is state-owned manganese-ore mining company headquartered in Nagpur. It got listed on 1 November 2010 at Rs551 and closed the day 15.34% down at Rs466.5. It made 52-week low of Rs182.35 on 7 August 2013 and 52-week high of Rs259.95 on 24 March 2014. Till date it has nowhere near its listing price of Rs551. On Tuesday, MOIL closed 2.27% down at Rs247.05 on the BSE. As on 25 March 2014, its share price was down by 47.04% compared with its closing price on its listing day.

United Bank of India

United Bank of India is a state-owned lender headquartered at Kolkata. It got listed on 18 March 2010 at Rs77 and closed the day 10.65% down at Rs68.8. It made 52 week low of Rs23.40 on 21 February 2014 and made 52-week high of Rs62.95, a year ago on 18 April 2013. On Tuesday, it closed flat at Rs27.45 on the BSE. As on 25 March 2014, it was down as much as 60% compared with the closing price of its listing day. UBI was recently in the news, saddled by huge bad loans and exit of its Chairman and managing director under cloud.

Punjab & Sind Bank

Punjab & Sind Bank (P&SB) got listed on 30 December 2010 at Rs146.1 but closed the day 13.04% down at Rs127.05. It made 52 week high of Rs63.70 on 2 May 2013 and a 52-week low of Rs36.75 on 29 August 2013. On Tuesday, P&SB closed flat at Rs41.60 on the BSE. As on 25 March 2014, it was down by over 67% compared with the closing price on its listing day.

Hence, if you have followed the suggestion of the brilliant minds of MCA and ICAI, you would have made massive losses. The reason is that PSUs are badly managed – not because they have bad managers – but because they are treated as the personal fiefs by ministers and secretaries.




3 years ago

Nice investor education this.

Beginners will surely learn an early lesson . . . about what NOT to do.

And in equity investing, the Dont's are far more important than the Do's.

Milind Chitnis

3 years ago

Asking small investor to invest in IPOs of PSU in "Beginners's Guide" is a joke. One would have thought a balance fund or diversified fund would be a much better choice.

However having said that, while presenting price performance of past issues, should you not consider "offer price" rather than "closing price on the day of listing"? For person who has applied in IPO, that is the price he has paid.

Gopalakrishnan T V

3 years ago

Investment in IPOS of PSUs is to throw away ones hard earned savings The UPA government has cheated the investors by attractiing them to invest in IPOs and all are suffering. Shipping Corporation of India, NHPC, etc have attracted investors and all are quoting below the issue price.The credibility in the capital market and for IPO issues has been fully lost and investors are cursing the Government and SEBI for trapping and cheating them.The greed of the UPA government has literally given a go bye to the business ethics and open loot through scams, IPOs,bad loans,agressive pricing of any commodity without any rhme or reason have become the order of the day.Wrong taxation policies and laxity in Governance have made a mess of the economy and anybody can get away with anything has become a ground reality. People who think definitely cannot forget and forgive this Government for ever.


3 years ago

There was another chap recommending in a financial daily to invest in CPSE ETF. His argument was 5% discount + 6.66% loyalty bonus will any way give us 12% return. Guess he forgot to factor in the prices of PSU shares a year later.

SC to hear Sahara plea on Wednesday

The apex court said that it cannot appreciate a proposal being made across the bar from Sahara group

The Supreme Court on Tuesday adjourned hearing on Sahara Group chief Subrata Roy's bail plea.


During the hearing on Tuesday, the Sahara group offered to pay market regulator Securities and Exchange Board of India (SEBI) Rs20,000 crore within next 12 months. This is the money, two Sahara group companies collected from investors through optionally fully convertible debentures (OFCD).


In a fresh proposal to the bench of Justices KS Radhakrishnan and JS Kehar, the Sahara group said they will deposit with SEBI Rs2,500 crore within three working days of the acceptance of its proposal and three instalments of Rs3,500 each on 30th June, 30th September and 31 December 2014. The balance Rs7,000 crore would be deposited 31 March  2015, the group said.


The Sahara group said its proposal to deposit Rs20,000 crore to the market regulator in five instalments would be backed by an irrevocable bank guarantee.


The court will consider the proposal on Wednesday as it declined to entertain the same today, saying that it cannot appreciate a proposal being made across the bar. The court said the same should have been submitted to the registry Wednesday evening so that they could have gone through it.


Roy will remain in judicial custody as the hearing on Roy's bail plea will now resume on Wednesday.


The court had 4th March sent Sahara chief Roy and his two directors to Tihar jail for failing to deposit the said amount to the market regulator.




3 years ago

Why SC is listening to Sebi rather than investors who did not come forward against Sahara. Sebi is working under political pressure rather than for justice


3 years ago

SEBI's single point agenda is to demolish Sahara as it clearly knows that it can not win this battle fighting as per Legal provisions under the law's of the land. It has created a very unfortunate situation wherein Hon'ble Court's order is being challenged as "constitutional & illegal".



In Reply to viv 3 years ago

It should be read as "unconstitutional & illegal".

MCX may be restrained from launching fresh contracts

If Jignesh Shah-led Financial Technologies fails to cut its stake in MCX to 2% from 26% by 30th April, then FMC may restrain the commodity exchange from launching fresh contracts

Multi Commodity Exchange (MCX), the country's largest commodity exchange may be barred launching fresh contracts if it fails to bring down promoter’s stake to 2%. Jignesh Shah-led Financial Technologies India Ltd (FTIL), the chief promoter holds 26% stake in MCX.


Commodities market regulator Forward Markets Commission (FMC) might crack the whip on MCX in case the bourse fails to comply with its directive on reducing promoter shareholding which came in the wake of Rs5,600 crore payment crisis at National Spot Exchange Ltd (NSEL).


“FMC will take action against MCX if they do not comply with the shareholding order by 30th April. FMC is likely to stop MCX from floating new contracts,” an official said.


The commodity market regulator’s order has been challenged by the group in Bombay High Court.


In its order of 17 December 2013, FMC declared FTIL and its chief Jignesh Shah as 'unfit' to run any exchange following the turmoil at NSEL.


The regulator said FTIL was not ‘fit and proper’ to hold more than 2% stake in MCX.


Following this, the MCX board also asked its promoter FTIL to divest shares in excess of 2%.


The NSEL, which is promoted by FTIL, has been defaulting on payments to 13,000 investors. In July, FMC had halted trading at the exchange.


Multiple investigative agencies like Enforcement Directorate and the CBI are already probing the NSEL payment crisis, while Revenue department, Reserve Bank of India, SEBI, FMC and Ministry of Corporate Affairs are also looking into it.


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