In what could make investors wary of participating in initial public offerings (IPO), 70% of the companies which listed on the stock exchanges in FY2010-11 are trading below their issue price. The BSE IPO index , which tracks prices of all newly listed firms with a freefloat market capitalisation greater than R100 crore from the third day of trading till two years from the date of listing, lost 13% during the year, coming off to 1,767. While Sensex posted an 11% gain to close at 19,445 on March 31, the BSE MidCap index gained just about 1% while the BSE Small Cap Index lost 4%.
Only 16 of the 52 companies, to have listed between April 2010 and March 2011, are trading above their issue prices, with the stock prices of more than 10 companies down more than a whopping 50%.
The government-owned Coal India which debuted on the bourses in October, was up 45% over its IPO price of 245, though MOIL, which was priced at R375 is up just 5%. Coal India raised around R15,200 crore in what was the India?s largest IPO ever. Foreign instituional investors (FIIs) bought into the issue with the quota for large investors being oversubscribed as much as 25 times.
On average, stock prices of companies, that hit the market in 2010-11, are down 7% from their issue prices. The worst-performing stocks of 2010-11 are Aster Silicates, Gyscoal Alloy and Sea TV Network; each of them is down more than 75%. The companies that have delivered the best returns are Gravita India, Fineotex Chemical and C Mahendra Exports ; their stock prices are currently up more than twice the issue price. Interestingly, those investors who sold immediately as the stock listed made good returns; data show about 605 of the issues closed with gains on the listing day. The year 2010-11 saw 52 companies hit the market with IPOs raising close to R33,328 crore, the second-highest amount in a year. The highest-ever mobilisation through IPOs was R42,563 crore deen in FY08, which saw 82 IPOs.