IPO market loses R215 cr in 2013 on poor investor sentiment

Lack of conviction among investors and poor performance of past issues continue to haunt the primary markets in India that saw the R126-crore initial public offering (IPO) of Scotts Garments ? the second this year ?being called off last week.

Merchant bankers say these are tough times for IPOs due to weak economic conditions and lack of regulatory and policy reforms. In addition, due to a range-bound secondary market, past issues have not performed as per expectations, leading to low appetite among investors.

?The performance of public issues during the last couple of years has forced investors to remain on the sidelines. Many issues that got listed are trading at a

discount to the issue price. Moreover, secondary markets are still under-priced and will take some time to restore confidence,? said a senior investor banker with a domestic investment banking firm.

Bankers say the window of opportunity is very small due to the volatility in the market and pricing (valuation) plays a key role in the success of an issue. For instance, the Nifty has gained 8.6% during the last one month. However, the 50-share index had declined more than 10% in March from the highs of January.

Cumulatively, the IPO market has lost R215 crore so far this calendar year due to poor investor sentiment and volatile secondary markets.

In February, Hyderabad-based Sai Silks (Kalamandir) failed to impress the market with its R89-crore IPO. The issue was subscribed 0.87 times.

Last week, Bangalore-based Scotts Garments withdrew its public offer after failing to garner sufficient participation from institutional and non-institutional investors alike, even as the company lowered its price band and extended the closing date of the issue. The issue was subscribed 0.27 times.

Merchant bankers highlighted the lack of need among corporates to raise money given the uncertainty in economic conditions and regulatory framework.

?Corporates are cautious in raising money due to the fear of change in policies and regulations ahead of the election year. Hence, primary markets are in a lull at the moment,? said another investment banker.