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Reality check: 46 of last year’s 75 IPOs bombed

Investors suffer a notional loss of Rs 3,629 crore, report BS Srinivasalu Reddy and Suprotip Ghosh.

business Updated: Apr 10, 2007 02:05 IST
BS Srinivasalu Reddy and Suprotip Ghosh
BS Srinivasalu Reddy and Suprotip Ghosh

It's not good news for subscribers of initial public offerings (IPOs). Of the 75 companies that raised funds on the markets in fiscal 2006-07, 46 are trading below their issue price, according to Bloomberg data. Investors have suffered a notional loss of Rs 3,629 crore, according to calculations made by HT.

Of the 75 IPOs that hit the market in 2006-07 — raising Rs 25,000 crore — only 29 have given positive returns.

Uttam Sugars led the loss-making pack, losing 59.31 per cent of its IPO price of Rs 340 per share — a loss of Rs 80.66 crore for investors. The stock, closed last Thursday at Rs 138.35, the final trading session of last week.

The top losers by volume include Cairn Energy, Lanco Infratech, Parsvnath, Deccan Air and House of Pearls, while losers by percentage were Uttam Sugars (59.31 per cent), Oriental Timex (52.6 per cent), Broadcast Initiatives (52.58 per cent), JHS Svendgaard (51.81 per cent) and Emkay Share (49.21 per cent).

The textiles sector suffered the most. "IPOs by House of Pearls, Richa Knits and Abhishek Mills were perceived as overpriced. They sought higher price-earnings multiples than even well-established players like Vardhman, Welspun and Gokaldas Exports," said Fasiha Shaikh, textile analyst at Angel Broking. “These companies are reaching their fair values only now."

Some infrastructure companies that priced their issues higher suffered too. These include Unity Infraprojects, Lanco Infratech, C&C Construction, Marg Construction, Akruti Nirman and Gayatri Projects, which are trading at least 20 per cent below their issue prices.

First Published: Apr 10, 2007 01:38 IST