It's not surprising that investors have already committed a hefty sum of Rs 805 crore in just three software IPOs (Sonata Software, KPIT Systems and Cybermate Infotech). The rate of oversubscription in these recent issues is unprecedented in the history of Indian capital market. Cybermate Infotech, which is likely to be listed on Monday, is already commanding a premium of Rs 25 (offer price Rs 10) in the grey market.

For those who have missed the bus, a number of software issues are already in the pipeline. Some of them include SQL Star International, Polaris Software, Microland, Planetasia.com, Sony Infosys and UTV. Says Vallabh Bhanshali of Enam Financial Consultants, ``The primary market hasbeen dead for quite some time now. The investors have also lost heavily in several bank IPOs. The current software IPO boom provides them with an alternative investment opportunity. Some investors are also getting out of counters like Satyam, Infosys and NIIT. Now, they are on the look out for stocks with a price-earning multiple in the range of 8-12.'' However, the current mad rush for software IPOs carries its own risk. Although the current boom provides an attractive entry level, merchant bankers strike a note of caution.

``Foreign institutions are really giving a big push to software IPOs as they do elsewhere. And the investors are picking up good and bad software IPOs. The current software IPO boom may not last long and many investors may burn their fingures,'' says Bharat Bhushan Sahney, vice-president, Delhi Stock Exchange.

M K Doogar of Doogar and Associates calls for tighter regulation from Sebi to separate the bad from the good. According to him, ``Sebi should set up a separate cell manned byexperts to clear software issues. This can help check unscrupulous promoters from tapping the public. Also, the offer for retail public should not be more than 20 per cent. The balance 80 per cent should be reserved for foreign as well as domestic institutions as they are better equipped to evaluate the issue.''

If the current craze for software issues continues unabated, the two-penny NBFC stocks in their new avatars (a number of them have attached a software tag to their names) can take investors for another round of ride. Agrees Rajat Prasad of RR Financial, ``Investors will have to be very selective on software IPOs. The regulatory authority should be very diligent in clearing these issues. Although I don't see any artificial market created for software IPOs right now, such a possibility cannot be ruled out in future.'' A few words of caution apart, the blind run continues. Says an analyst: ``Indian software firms have immense scope for expansion in the short run.

However, the things are veryunpredictable in the medium as well as in the long run.'' The very high PE multiples in the range of 30-50 reflect market speculation on very high growth prospects. ``The kind of oversubscription in KPIT Systems or Cybermate mirrors the fact that investors do not want to miss this opportunity. The oversubscription in the range of 27-55 times is also due to the fact that investors apply for large chunks of shares in order to ensure allotment,'' adds a merchant banker.

With software companies offering low floats, there is huge demand-supply mismatch.