2011: horrible year for public issues
Of the 39 public issues that hit the market to raise more than Rs 14,000 crore, only nine are currently trading above their issue price, and have caused huge losses to investors. HT reports.business Updated: Dec 21, 2011 01:03 IST
For retail investors who invested in initial public offerings (IPOs) and follow-on public offerings (FPOs) of companies, 2011 would be a wasted year. Of the 39 public issues that hit the market to raise more than Rs 14,000 crore, only nine are currently trading above their issue price, and have caused huge losses to investors (see table).
Weak sentiments due to uncertainties in the global economy, unknown companies promoted by little-known entrepreneurs and over-pricing are some of the major factors behind poor performance of these public issues.
“Barring few, most companies, which hit the market in 2011, were unknown and promoted by little know promoters,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.
While collectively the IPOs and FPOs raised Rs 14,112 crore in the current calendar year, the 26% decline in the benchmark Sensex during the year has eroded over Rs 4,000 crore from the valuation of these offers.
According to experts, the pricing of the offers was done in favour of promoters and hence the issues became over-priced for for retail investors.
Well-known names such as Tatal Steel, L&T Finance Holdings, Power Finance Corporation, Future Venture also did not receive encouraging response from the market.
“Of late, investment bankers price an issue in favour of promoters, to give them as much money as possible,” said CJ George, MD, Geojit BNP Paribas. “Issue prices are against the investor and we need to examine whether something is going wrong with this approach.”
“Valuations need to be reasonable, and you need to leave something on the table for retail investors — these days, even PSUs want the highest valuation possible,” said George.Going ahead, 2012, may also not be easy for these companies, said experts.