The association of a stock exchange president's own merchant banking arm as an issue lead manager can truly help the issuer as well as the investors in many ways! Want a proof? The Bhiwadi (Rajasthan)-registered Aksh Optifibre, whose Rs 35.76 crore equity issue was lead managed by Anand Rathi Securities, closed its issue only on July 20. Thanks to the involvement of the BSE president's own merchant banking arm, Aksh could list and trade its shares on the country's premier stock exchange within just five weeks from the issue closing! Interestingly, on its regional exchange at Jaipur, the scrip is yet to be traded. What's more, at the time going public, Aksh had promised to list its shares only on JSE and BSE. But, now, along with BSE, the scrip has also been listed on the National Stock Exchange (NSE) thereby facilitating more liquidity for the investors. In fact, Aksh's profitability (loss in three out of five years) record would make one wonder how the offer scrutinising committee of the country's top twoexchanges allowed the company to price its Rs five paid-up share at a whopping Rs 60.Strangely, when the company's book built portion, which was thrice the size of the fixed price portion, was claimed to have been oversubscribed nearly eight times, the fixed price portion was subscribed just 1.16 times! On August 23, the scrip opened its account around Rs 65 on both BSE and NSE, and closed the day around Rs 63 on both the exchanges. Second day, August 24, saw the closing higher at above Rs 64 on both BSE and NSE. Considering the current depressive market sentiment in general, and Aksh's lackadaisical track record in particular, the scrip's performance on listing is indeed commendable. But, the question is, how long will the honeymoon last? The quality of the company's current profits would certainly question the scrip's present market valuation.
For the starters, the company, known as Aksh India until March this year, was actually promoted fourteen years ago by the Choudhari family and Navani family for manufacturing PVC and PE insulated specialty cable. In 1994, the company decided to diversify into optical fibre cables and gradually built up a capacity of 33,222 ckm by fiscal 1999, besides integrating backwards into the manufacture of optical fibre with an installed capacity of 1.5 lakh fkm. Today, Kailash Choudhari, an MBBS, is said to be the sole promoter of Aksh.
Operationally, Aksh, which posted a pre-tax profit of Rs 9.84 crore in fiscal 1996, reported losses in the next three years. On the eve of the public issue, in fiscal 2000, after taking into account a record trading income of Rs 8.90 crore and an other income of Rs 2.39 crore, the company posted a pre-tax profit of Rs 5.89 crore, post-tax being Rs 5.34. In last three years, the company's capacity utilisation has been just 15.55 per cent, 15.35 per cent and 24.75 per cent for optical fibre, and 38.88 per cent, 18.54 per cent and 43.10 per cent for optical fibre cable. Before achieving a respectable capacity use, Aksh is now going in for a major expansion at a cost of Rs 41 crore, which has got the blessings of ICICI with a term loan sanction for Rs 6.87 crore.
The investors of the other three IPOs which got listed this week have not been so lucky as Aksh's. Incidentally, all the three IPOs which are going abegging after listing were all offered at par. Interestingly, all the three were listed at a nominal premium. More than two months after its issue closure, the Ind Global-lead managed Bangalore-based Kirloskar Multimedia began its muhurat on August 21 at both Bangalore and Mumbai at Rs 11 and Rs 12 respectively. Perhaps for an issue which was subscribed just 1.4 times one would not have expected better than this. Nevertheless, the opening quote turned out to be the scrip's historical high too! Currently, after four days of trading, the scrip has settled around Rs seven on both BSE and BgSE.
Unlike Kirloskar, the public issue of the Hyderabad-based Sark Systems was reportedly oversubscribed 2.77 times. After 67 days of waiting, this Aryaman Financial-lead managed IPO was listed for trading this Thursday on its regional exchange (HSE) at a nominal premium of one rupee. But, same day, the price croreashed to Rs 6.35. The heavy volume of more than a lakh in the first day at rates far below the offer price of Rs 10 does not augur well for the scrip's immediate future.
The more than three-time oversubscroreibed Sibar Media's IPO has been listed on its regional exchange within a short span of 46 days. This Fedex Securities-lead managed Vijayawada issue was listed on HSE at Rs 11 on August 23. After peaking at Rs 12.30, the scrip closed the first day at Rs 9.75. Having a relatively large equity base of Rs 21 crore, the scrip's future course will be known next week when BSE lists the scrip for trading.
(Arranged by Investar - The Aarthik News & Research Group) [E-mail feedback to:investar@bol.net.in (or) fernando@bol.net.in]
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