Retail investors skip IPOs

Retail investors seem to be shying away from initial public offers with high valuations, reports MC Vaijayanthi.

Retail investors seem to be shying away from initial public offers with high valuations. Wockhardt Hospitals Ltd is extending the closing date of its IPO by two days to February 7 due to lack of sufficient subscription.

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The issue, which was slated to close on Tuesday (February 5), had received only 10 per cent subscriptions, according to details provided by the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Almost half the subscriptions were done at the cut-off price. According to the data, bids were received for a total of 23.9 lakh shares. The issue is being done through the book-building route where, during the fixed period for which the IPO is open, bids are collected from investors at various prices, between the floor price and the cap price. The final issue price is not determined until the end of the process when the book has 'closed'.

The issue has met with tepid response even after the company revising the price downwards to Rs 225-260 ahead of the opening of the IPO, citing bad market conditions. Wockhardt Hospitals had originally fixed the price band at Rs 280-310 per share in an attempt to raise Rs 780 crore.

“People are getting choosy with IPOs. Grey market operators have also taken a big hit and trades are being squared off at rates much lower than originally contracted. Henceforth it would be very difficult for high price issues or say bad issues to see big subscriptions,” said a broker involved with retail IPO marketing.

Though analysts have no doubts about the quality of hospitals or the company's growth plans, it is the high valuation that made brokerages, cautioning investors against subscribing to the issue.