Software companies like Fore C Software, Telesys Software, Shree Rama Multi-Tech, Helios & Matheson, Omni Ax's Software, Mascot Systems, Contech Software, Integrated Hitech, Cerebra Integrated Tech, Bangalore Softsell, Archana Software, Visesh Infosystems, Zenith Infotech, SQL Star International, Kale Consultants, SoftSol India, Avantel Softech and KPIT Systems are now trading at a discount of upto 56 per cent to their offer prices.

Comparing the current market price of these companies with the IPO price, a back-of-the-cover calculation reveals that the capital erosion the investors facing could be more than Rs 160 crore. An IPO investor would have lost more than half his investment amount. An investor who entered in these counters at a higher price compared to the offer price, his capital loss could be much more.

Cinevista Communication is the only media company which figure in the list. In fact, media companies seem to have beaten the IT companies as far as charging premium is concerned. After TV18's successful IPO, several media companies lined up high premium IPOs. One such issue was Cinevista. Cinevista's Rs 75.9-crore IPO was offered at a hefty premium of Rs 290. Although the investor response to the offer was overwhelming, a crash in ICE stock prices has shaken the investor confidence.

Nevertheless, Cinevista's IPO was overpriced and the stock is currently languishing at around Rs 187. Investors in this IPO are yet to get an exit route. The capital loss in Cinevista is almost Rs 29 crore. This has affected several other media and IT companies' IPO. In fact, the writing on the wall is very clear: investors will think twice before investing in a high premium issue.

Creative Eye, after a poor response to its bookbuilding portion, had to withdraw its IPO. Creative Eye is planning to come out with an IPO at a lower price. IT company SIP Technologies has also cancelled its IPO and will tap the market with a `reasonobly priced' issue. SIP had offered shares through bookbuilding at a floor price of Rs 235.

Several IPO investors have caught on the wrong foot. Nevertheless, they have to blame themselves for their plight. While software companies with a reasonably good track record charged unjustifiable premium, small companies with no serious business plans floated par and small premium issues.

Mascot Systems had charged a premium of Rs 475 for each Rs 5 share and the Rs 144-crore issue was just subscribed. Although the company has a reasonably good track record, the IPO price was not in line with its size of operation. The stock is now trading at almost 33 per cent discount to the IPO price and the investors are suffering a capital erosion of around Rs 47.4 crore.

Fore C Software, Telesys Software, Helios & Matheson (which was into the financial field), Omni Ax's Software and Contech Software, a few to mention, were below average issues. Several other IPOs like Balwas e-Com and Baron Infotech (not in the list) are now trading close to their offer prices. KPIT Systems, which had offered shares at a price of Rs 90, is now trading at Rs 76.85. KPIT System had in fact triggered the premium race by software companies.