Sebi further examined the prospectuses of 12 realty issues and found that seven companies had made no disclosure about land banks (many of them went ahead and raised public money at a huge premium) and in five cases, although the valuation was disclosed, it included a substantial percentage of land that was not owned by the company. The realty sector alone provides ample reason to give investors a snapshot of corporate fundamentals in the form of an IPO grading. Yet,there are plenty of experts who continue to lobby hard against IPO grading as an investor protection tool, claiming that ordinary retail investors ought to be smart enough to cut through dubious valuations and incomplete disclosures without expert help.

The post-issue performance of realty companies listed between April 2006 and January 2007 only underlined the need for tightening the rules. Consider these: The controversial Atlanta Ltd, which was subject of a detailed Sebi investigation issued shares at Rs 150, was listed at Rs 192. Its shares were later ramped up to a high of Rs 1,446 and its last traded price was down to Rs 269.49. Parsvanath Developers raised nearly Rs 1,000 crore by issuing shares at Rs 300. They opened for trading at Rs 456.70 and the last traded price was Rs 265. Akruti Nirman raised Rs 361 crore at an issue price of Rs 540. It was listed at Rs 701 and has been trading down since then to Rs 410. Sobha Developers raised Rs 570 crore at Rs 640 per share. The scrip trades at Rs 803 after having opened at Rs 968. Along with D S Kulkarni it is among the few realty companies still trading at a premium to offer price. D S Kulkarni’s offer price was Rs 132 and its last traded price was Rs 265 on March 30. Somewhere along the way, half a dozen developers floated overseas entities and got their shares listed on London’s AIM market. This party ended abruptly when most shares started trading at a discount within days of listing.

... contd.