World’s tallest tower fails to wow Indian investors

It has built the world’s most talked-about hotel, the Burj al-Arab in Dubai, and is working on the tallest building in the world (the Burj Dubai), but Emaar’s stock offering in India, Emaar MGF, hasn’t got Indian investors excited.

Wednesday was the scheduled close of the offer, but subscriptions were received for only 75 per cent of the shares on offer. The infrastructure giant was forced to extend its deadline to February 11 and reportedly reduced the price band of its share from Rs 540-Rs 630 to Rs 530-Rs 630. It wasn’t just Emaar, though. Wockhardt Hospitals’ stock sale, scheduled to close on Thursday, got subscriptions amo-unting to a mere 3 per cent of the shares on offer till late in the day.

The threat of a US recession is looming and investors are in no mood to put money on giants with revenues only projected in the future. They are opting instead for smaller players with established revenue streams. In a protracted slowdown, revenues in the bag are more important for the share’s valuation than money that may come in only at a later date, feel investors.

The focus has moved from the quicksand of risk to the firmer ground of valuations.

“There is a general fatigue in the market,” said A Balasubramanian, chief investment officer at Birla Sunlife Mutual Fund. You can blame it on the withdrawal of funds by foreign investors and highly-priced initial share offerings.

VK Sharma, chief of research at Anagram Stockbroking, said there are two factors that can make a share offering work — a buoyant market or an attractive price. But the market is struggling, so price is the driving force.

In stark contrast to Emaar MGF and Wockhardt Hospitals, smaller issues like IRB Infrastructure Developers, OnMobile and Shriram EPC sailed through. IRB was oversubscribed 4.3 times with the share value fixed at Rs 185, the lower end of the price band it offered.

Also, Wockhardt Hospitals and Emaar MGF seem overpriced when compared to earnings per share of listed companies in their respective sectors.