Two Out Of Three IPOs Sink Below Their Offer Price On Friday; May Queer The Pitch For New Issues

IPOs feel the Oct heat, slip on debut    These kinds of steep pricing provoked Securities & Exchange Board of India, or Sebi, chairman CB Bhave to warn that investors would not be interested in IPOs if the trend continued. "In a bid to maximise returns for promoters, they (investment bankers) are not looking at the interests of investors," Mr Bhave said on September 24. "You need to introspect whether it is a healthy practice. If you keep investors disappointed day in and day out, the cause of investors will only be a lip service." Even top executives such as HDFC chairman Deepak Parekh are worried that the IPO market may be getting into a bubble zone.

   INVESTORS lost money in two of the three initial public offers that listed on Friday, and had meagre gains in the third, possibly making it tough for future issues if bankers and companies seek high valuation. Orient Green Power, a clean-energy company, and Ramky Infrastructure, a builder of roads and bridges, fell as much as 14% from their sale prices. Electrosteel Steels, which sold shares at 11, gained 2.2% to 11.25.
    "There is always a risk of an IPO not fetching good premium, if it is priced aggressively in the bullish market," said Devesh Kumar, joint managing director and Group CEO, Fortune Financial Services. The market has been in correction mode for past two days, and this affected sentiment towards the new listings on Friday.
    In a related development, BS Transcomm, a provider of telecom and power infrastructure, has lowered its IPO price band to 248-257 from 257-266 and also extended the issue by three working days. The move could have been prompted by tepid investor response to the offer that had received only 60% subscription till Friday evening. The offer will now close on October 13. At the upper end of the revised price band, the company is expected to raise around 200 crore. Companies and investment bankers have been exploiting the dream run in the secondary market by pricing IPOs at a steep valuation, inviting a rare criticism from the market regulator. While some believe that it is investor greed that is leading to disproportionate demand, others say some losses would make it difficult for even good issues to go through. Many companies such as Jindal Power, Reliance Infratel, Sterlite Energy and Lodha Developers may raise funds in initial share sale amounting to more than 30,000 crore, analysts estimate. Apart from these companies, state-owned Coal India plans a listing that may make it the biggest ever in the country, with the IPO size estimated at 12,000-13,000 crore. Demand for IPOs seen strong
ALTHOUGH some issues have led to erosion of investor wealth, demand at this point of time remains strong. Oberoi Realty's 840-crore IPO ended with over 12 times subscription on Friday. Career Point, a company that trains students for engineering and medical entrance tests, doubled on listing.
    "The latest is not an indication of the easing of euphoria for IPOs in the secondary market, as there is enough liquidity," says Mr Kumar.
    Hyderabad-based Ramky Infra is estimated to have been priced around 21 times at 450 a piece. Orient Green Power, with a revenue of 56.2 crore, at 47 a share was valued more than 2,000 crore.