With two medium- to large-sized issues cutting their IPO (initial public offering) prices by 10-20 per cent, the downturn in secondary markets is now visibly seeping into the primary market. While construction and real estate major Emaar MGF lowered its price band to Rs 540-630 from its earlier price band of Rs 610-690 (a fall of 9-11 per cent), healthcare company Wockhardt Hospitals slashed its issue price from Rs 280-310 to Rs 225-260 (a fall of 16-20 per cent).

With this, the post-listing market capitalisation that Emaar was eyeing has come down by Rs 5,915 crore to Rs 62,111 crore at the higher end of the price band. Similarly, the market capitalisation of Wockhardt is down Rs 521 crore to Rs 2,711 crore. The IPO of Wockhardt opened today, while Emaar opens on February 1.

The volatility in the secondary market over the past nine trading sessions holds the key to this correction. According to an investment banker of an issue open for subscription, “The prices are being revised because of the unexpected response to other issues that were open for subscription. It’s purely external factors that are impacting the enthusiasm and nothing related to the company.”

Strong are these external factors. The Sensex is down 7.2 per cent or 1,365 points since January 18. This market behaviour under the influence of global factors followed by liquidity squeeze by the mega issue of Reliance Power and squaring up off the domestic open interest positions is now impacting the IPO market.

... contd.