D-Link sets high IPO floor price of Rs 300

D-Link sets high IPO floor price of Rs 300
ENS ECONOMIC BUREAU

MUMBAI, FEB 15; While ICE stocks continue to melt on the stock markets, yet another IT networking company, D-Link (India) Ltd (DLIL), has come out with an initial public offering (IPO) at a high price. Even as investors have lost heavily in the recent high premium ICE stocks, D-Link has stunned the market by fixing the floor price of its IPO at Rs 300 per share for the 90 per cent book-building portion, which opens on February 20, 2001.

Promoted by first generation entrepreneur K R Naik, DLIL is part of the multinational D-Link Corporation (Taiwan Group), which along with D-Link Asia, currently holds 45.31 per cent stake in the company (post IPO it will be 33.98 per cent).

On a volley of questions from reporters on the high pricing, its chairman and managing director K R Naik put on a brave face and said "I am confident that after six months you'll come to me and say that the issue was priced low. Moreover prices are not fixed by any one person, it is `market driven'. We had taken a short term loan and have already put in place the required machineries so that there is no delay in commissioning of the project."

In fact, out of 29 IPOs which hit the market in the last one year, 27 IPOs have disappointed investors. The fall in the share prices of nearly a dozen high-profile IPOs below their offer prices reveals that things have not improved in the primary market. "Most of them came to the market at a high premium. They also made tall claims about their prospects. But they have failed in giving a decent return to the investing public," said an investor.

Tips Industries is a classic example. The IPO of Tips which created a storm was offered at Rs 325 per share. The share is quoting at half of the offer price - at Rs 186.65 - on the stock exchanges. Pritish Nandy Communications has also fallen steeply below the offer price, much to the chagrin of investors. "Promoters and book runners cannot blame it on the depression in the stock market. Sensex has been rising in the last a few weeks, but these IPOs are quoting at huge discounts," said a fund manager.

Infotech company Kale Consultants which offered shares at Rs 120 per share is now quoted at Rs 80, a discount of 33 per cent. Geometric Software which came out with an IPO at Rs 300 has fallen to Rs 120.90, showing a fall of 60 per cent.

However, the company's offer document also lists a number risk factors. "A conflict of interest may arise between D-Link (India) Ltd and its subsidiary D-Link Infotech Ltd, in the software development business," it says, adding, "The promoters do not have adequate experience in the software development division which is proposed to be financed out of the issue proceeds."

"Though the promoters do not have adequate experience in software development, they have adequate background in the same. Besides, the company has recruited key persons for software development business and is in the process of recruiting software professionals who will be engaged in the software development business," the company clarified.

"The cost of the project/means of finance has not been appraised by any bank or institution and the same are based on the estimates of company's management. The manner of deployment of the issue proceeds will be at the discretion of the managment and there will be no monitoring," says another risk factor.

"Though the project is not appraised by any FI/bank, the company has exercised due caution while arriving at the project cost. The company has implemented projects in the past, thus it has experienced of proper deployment of funds in the project," the management clarified. Virtual Computer Pvt Ltd, a group company of DLIL has made losses for the financial year ended March 31, 2000.