When the high profile Pritish Nandy Communications Ltd (PNCL), promoted by the flamboyant media personality-turned-member of Parliament (Rajya Sabha), went public in the company of Triump International propelled by Dalal Street's present day `Big Bull' and SMIFS Capital controlled by the 1992 scam fame Ajay Kayan of Lyons Range as `syndicate members' through the book building route in September this year, little would have the `book running lead manager', JM Morgan Stanley (JMSL), worried about the fate of the public issue. JMSL appeared to be so confident of the success of PNCL's IPO that it solely underwrote the entire book built portion of Rs 36.50 crore.

For the fixed price portion too, JMSL was the single largest underwriter with a commitment of Rs 1.03 crore.

However, PNCL's offer at a floor price of Rs 155 (paid-up value Rs 10), which remained open for bidding one full week from September 4 to September 11, could attract only 419 bids. Whereas, just 11 institutional investors bid for 27 lakh shares against the total book built offer of 23.55 lakh shares, 32 non-institutional investors had bid for 9.25 lakh shares. The offer received only 376 retail bids for just 41,850 shares which would probably explain the investing public's sentiment towards PNCL. While the company prominently publicised the basis of allotment of its book built portion which was reportedly subscribed 1.56 times, it chose to underplay the subscription details of the fixed price portion of 2.62 lakh shares. The mandatory disclosure claimed that full and firm allotment was made to all valid applicants. But, it did not specify how many applications it received for the fixed price portion and to what extent the issue was subscribed.

dismal response to their IPO. But, they privately reveal that, as against the fixed price portion of 2.62 lakh shares, PNCL received just 288 applications for 27650 shares which amounted to just 10.56 per cent of the offer!

The unsubscribed portion devolved on the major four underwriters, namely JMSL, Triumph International, SMIFS Capital and UTI Bank, who had underwritten in the ratio of 25.4 per cent, 24.9 per cent, 24.9 per cent and 24.4 per cent respectively. Meanwhile, whereas it could complete the allotment within 15 days of its issue closure, it took 54 days thereafter to list the share for trading.

Who is the culprit? Knowledgeable sources attribute the delay to the reluctance of the underwriters in fulfiling their obligations, ninth day after the issue. On the BSE, the scrip made its debut at Rs 150 (with a discount of Rs five) and after fluctuating between Rs 175 and Rs 148.50 it closed the day at Rs 166.90 thereby, yielding a gain of 7.7 per cent in less than two and a months.

On the NSE, the scrip had its muhurat at Rs 160 (with a premium of Rs five) and closed the day at 165.15 with a gain of 6.5 per cent over the offer price. After scaling a peak of 180 on BSE and Rs 188 on NSE, the scrip is now settled around the offer price of Rs 155. But, what's interesting is, the number of trades recorded by the scrip.

While PNCL's Rs 40.56 crore public issue could attract only around 700 investors, the scrip registered as many as 2,142 trades on BSE alone on the first day. Next day, it was still higher at 2763. In other words, the same scrip which could not attract more than 700 investors when the offer was made at Rs 155 has found more than 2,500 buyers in a day that too at a higher price of above Rs 170!

Fundamentally, PNCL has a `topsy-turvy' record. In fiscal 1996, on a capital of just Rs 40,000, it posted a pre-tax profit of Rs 1.7 crore. But, in 1998, on a capital of Rs 1 crore, it could post a profit of only Rs 43 lakh which, in fact was arrived at after taking into account an other income of Rs 40 lakh. Further, in fiscal 2000, despite the company's sales (Rs 12.24 crore) more than doubling the 1996 level (Rs 5.61 crore), profit could reach Rs 3.27 crore only with the help of an other income of Rs 1.86 crore! In other words, but for the hefty other income which was mainly "profit on sale of investments", fiscal 2000 profit would have been lower than what it was five years ago. With such fluctuating fortune, it may not be all that easy for PNCL to adequately service a capital base of over Rs 10 crore on a sustainable basis.

Moreover, PNCL itself admits (in the offer document) that its fortune "is largely dependent on the ideas, vision, creativity, experience, skill set and influence of Pritish Nandy, the promoter of the company". Here arises the question, how much time will the promoter devote for the company while he remains a member of Rajya Sabha? The promoter's style of functioning is already telling on the governance of the company. For instance, the so called issue "compliance officer" of the company is not able to give an ordinary information like the quantum of public subscription of the fixed price portion. After waiting for three days, he says, "no one other than the chairman is authorised to speak." Where is the chairman, and when will he answer the queries? "He is attending Parliament", comes the reply.

The big bulls and their cronies, who are saddled with a large quantity of PNCL's shares, may try to hold the market price above the offer level of Rs 155, with the coveted support of the ever-obliging public sector trusts and funds to safeguard their own interests. But, how long will they hold against weak fundamentals?

(Arranged by Investar - The Aarthik News & Research Group) [E-mail feedback to: fernando@bol.net.in (or) feedback@investaronline.com]