About 10 days ago,Great Eastern Shipping informed the stock exchanges that it had decided not to go ahead with the initial public offering (IPO) of its subsidiary Greatship India. With the secondary markets expected to remain volatile,after a fall of around 11% since the start of the year,it could be a while before companies are able to access the capital markets again to raise money. While state-owned ONGCs follow-on offer is expected to hit the markets sometime mid-March,first-timers like Greatship India are not sure if they will be able to see a good response from investors. Investors would be cautious before picking up shares in new companies because 80% of the IPOs that listed last year are trading below their issue price. A closer look at Bloomberg data reveals that only 13 out of 57 stocks have listed in the past one year and about a fourth of them are trading above their issue prices. Moreover,share prices of 16 of these companies are down more than 50% from the price that they listed at,though the average prices of the sample is about 20% lower than the issue price. Interestingly,government-owned stocks like United Bank of India,Coal India and MOIL are currently trading 47%,23% and 9% above their respective issue prices. Its not surprising then that only Rs 340 crore has been raised through IPOs so far in 2011. This is just over a tenth of the amount of the Rs 3,240 crore that companies were able to mop up in the same time last year. Among those waiting to tap the markets are L&T Finance Holdings,IOT Infrastructure,Jindal Power and Muthoot Finance. Merchant bankers are quick to blame the market,which incidentally is up 11% over the past one year. A sharp fall in benchmark indices,which are down about 13% from their November peak,have taken a toll and even the small and midcap indices have fallen about 25%. According to Brijesh Mehra,investment bank head,India,RBS,the fact that most companies are trading below their issue price has more to do with the market falling rather than faulty pricing. People have lost money because the market has corrected, said Kaustubh Kulkarni,MD-IB,JP Morgan. Among the worst performing are Aster Silicates,Commercial Engnieers,Tirupati Inks,which are down 75%. Stocks that delivered the best returns are Mandhana Industries,Gravita India and C Mahendra Exports.
