Shady IPO deals continue unabated

Activities in the Indian IPO space have a fair share of greedy promoters and underhand dealings. Issues continue to be priced irrationally, partly because of a misplaced perception of future performance and investor interest, and partly to feed the egos of power-hungry promoters. Adding to this, the nexus between company promoters and merchant bankers to the issue makes the picture even murkier. In such a scenario, who would blame the retail investor for not taking interest in the primary markets?

Retail investor response to recent IPOs has been tepid at best. These issues have been subscribed fully only through ‘discount deals’ with large institutional investors and merchant bankers, who demand a hefty discount of 30%-50% in order to help close the issue and soothe frayed nerves of panic-stricken promoters. This is one of the primary reasons explaining the mystery of IPOs listing at substantial discounts to the issue price. This may be just the tip of the iceberg, though, as other worrying trends are surfacing within the IPO arena. There are instances of promoters doling out cash to arm-twisting merchant bankers seeking upfront rewards for closing out under-subscribed issues. Other reports indicate merchant bankers applying in huge volumes to IPOs where investor response is muted, keeping promoters at their mercy till the last date of the book closure.

Of the 16 IPOs that have come up so far in 2009, only six are trading above the issue price. Others have plunged steeply against the issue price. Den Networks, which listed on 24 November, closed at a discount of 16.36% to the issue price of Rs195. It is currently trading at nearly 20% below offer price. Although the offer was oversubscribed 1.04 times, retail portion was subscribed only 0.0963 times. Investor interest was also muted in the offers by Oil India, Raj Oil Mills and Globus Spirits. Others are struggling to provide positive returns despite being oversubscribed. Euro Multivision and Rishabhdev Technocable are currently trading roughly 61% and 47% respectively below their issue prices. Indiabulls Power, which attracted huge attention even from retail investors, is down 27% over its issue price. Globus Spirits, Adani Power and NHPC also suffer from the same fate.

This IPO debacle has not gone unnoticed at various equity research firms, where some analysts are, for once, sounding off investors against putting money in IPOs of companies lacking enough credibility. Even companies with strong fundamentals are being scrutinised in greater depth. IPO price bands of Adani Power, Oil India and Raj Oil Mills were considered steep by some brokerage firms despite healthy prospects. Pipavav Shipyard IPO was actually assigned an ‘avoid’ rating in one of the research reports.

Amidst all this, the government is drawing up blueprints for follow-on issues for PSUs. However, before the government decides to immerse its feet in choppy waters, it should have a closer look at the goings-on to avoid being taken for a ride by the investment banking community. 




6 years ago


interesting article but the author has failed to highlight one of the basic problems:
'aggressive' pricing.
most ipos have settled down at their true value, post listing.

Food inflation jumps to 15.6% as potato prices soar

Food inflation shot up to 15.6% for the second week of November on the back of spiralling potato prices, which have more than doubled in the past year, reports PTI.

Other essential items like pulses and onion rose by more than 25% in the wholesale market, government data on inflation for the week ended 14th November showed.
"Food inflation is incredibly high...The drought has aggravated the situation and I expect the wholesale price-based inflation to rise to around 7% by March next year," said HDFC Bank economist Jyotinder Kaur.
With inflationary pressure building up, the RBI in its next policy review may take steps to check easy money. "It is likely that RBI in its January policy might go for monetary tightening measures and raise the cash reserve ratio (CRR) or policy rates," Kaur said.
According to the inflation data, potato prices rose by 111%, pulses by 35% and onion by 27% in the one-year period ending 14th November.
Staple items like wheat and rice rose by 12% each during the period. Vegetable prices too continued to go up, registering a 12% rise during the same period. However, among fuels, petrol prices fell by 12%, cooking gas by 7% and diesel by 6%.
Food inflation for the week ended 14th November was significantly higher even when compared on a weekly basis.
Axis Bank economist Saugata Bhattacharya said the persistence of higher food prices is worrying. "I expect wholesale price inflation to rise between 7% and 8% by March-end," he said.
Among other items, urad and poultry chicken prices rose by 15% each, eggs by 8%, moong by 6%, arhar by 5% and fruits & vegetables by 3%.
Led by costlier food prices, wholesale inflation rose to 1.3% in October from 0.5% in the previous month. Inflation had remained in the negative for 13 straight months before trudging into positive territory in the first week of September at 0.1%.
Among non-food articles, raw silk rose by 3% and fodder and groundnut seed by 2% each. Barley, however, fell by 2% and tobacco by 3%.
The fuel index, on the other hand, remained unchanged at the previous week's level. The primary articles index rose by 1.2% on a weekly basis and by 11.04% on an annual basis.
Yogesh Sapkale




7 years ago

Good news

ISRO to launch eight foreign satellites, also eyes acquisitions

India's space agency has in its pipeline eight foreign satellites for launch and is scouting to acquire such spacecraft from global sources to expand capacity in the field of communication transponders back home.

"Today, we have eight foreign satellites to be launched. These will be launched over the next two-three years,” said KR Sridhara Murthi, managing director of Antrix Corp—the marketing arm of Bengaluru-headquartered Indian Space Research Organisation (ISRO), in a response to PTI.
These are a mix of small and bigger satellites, he said, but declined to elaborate, noting that the space agency is yet to formally ink some of these contracts. But one foreign satellite that is being readied for launch is a 150-kg unit from Algeria, which is slated to be launched by home-grown Polar Satellite Launch Vehicle as a piggyback payload; the launch likely to take place by April next year. Mr Murthi said that ISRO was looking for opportunities to acquire foreign satellites.
In fact, ISRO, along with its global partners, recently (unsuccessfully) bid to acquire a satellite, which was put up for auctioning by a company facing bankruptcy, in the United States. Intelsat won the bid with a price of $210 million. ISRO was ready to shell out $100 million for part of the capacity that it intended to use, Mr Murthi said. ISRO's bold move is a sign of its growing confidence, he said.
ISRO has also started integrating the Hylas spacecraft, a contract it jointly bagged with EADS-Astrium, and it would be delivered to the customer, UK-based Avanti Screenmedia, in June.
Under the contract, EADS-Astrium is the prime contractor in charge of overall programme management and would build the communications payload, while Antrix/ISRO would build the satellite with a lift-off mass of around 2.5 tonnes and power of 3.2KW.
"This year we are producing a very sophisticated high definition television satellite (Hylas)—probably for the first time in the world,” Mr Murthi said. ISRO is looking to further scale up the participation of industries in space projects and is even looking at outsourcing some research and development tasks to them.
"Nearly 400 industries take part in space programmes today,” he said, noting that industries now undertake 70% of work on developing launch vehicles or rockets. "So, when an Indian rocket is a success, it's not merely ISRO which has to take credit, it is also a large number of industries which have to take credit (for the launch),” Mr Murthi said.
In addition, as of March this year, ISRO had transferred 289 technologies to modern industries for commercialisation and provided 270 technical consultancies in different disciplines of space technology.
ISRO endeavours to develop technologies with industries. "In the years to come, even for R&D tasks, ISRO will depend more and more on industries,” Mr Murthi said.
He also spoke about the profitability of the space business. Antix today has an annual revenue of over Rs1,000 crore.
"Each satellite can pay for itself including the cost of launching. If you take a communication satellite, we probably spend about Rs300 crore to launch one satellite. But, typically, this can pay back Rs800 crore to Rs1,000 crore over a period of its life,” he said.
“If we look at the value chain of space activities, if we invest one rupee in space, there is ten rupee business on (the) ground,” Mr Murthi concluded.


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