With the revival of the stock markets, private equity-backed companies have begun tapping the market for initial public offerings (IPOs) with gusto. About 16 PE-backed companies have filed draft red-herring prospectus this year to enter the booming market, which has grown more than 70% after March.
According to Venture Intelligence, five PE-backed firms have raised $1.1 billion through public issues till October this year against $530 million raised by nine PE-backed firms in the same period last year. Companies that have filed applications with Sebi recently to tap the market include Shree Ganesh Jewellery House (backed by Credit Suisse), DB Corp (Warburg Pincus), Hathway Cable (ChrysCapital), Reliance Infratel (Fortress Capital, New Silk Route), Vascon Engineers (HDFC Property Fund), Emaar MGF (Citigroup Venture), Oberoi Construction (Morgan Stanley), Lodha Developers and IL&FS Transportation Networks (Trikona Trinity).
This is despite some of the recently listed firms not doing well in the market. The shares of Adani Power, Indiabulls Power and DEN Networks have dipped below their issue prices. Shares of DEN Networks, a cable television distributor, backed by IL&FS Investment Managers, fell 16% to Rs 164.25 in its trading debut in Mumbai on Tuesday, against its issue price of Rs 195. The share closed at Rs 162 on the BSE on Thursday.
Shares of Adani Power, which opened at Rs 105 on the BSE on the first day (Aug 20), closed at Rs 94.10 on Thursday. Similarly, the Indiabulls Power share, priced at Rs 45, hit a low of Rs 35, a decline of 21.4%, on its debut. It closed at Rs 32.4 on Thursday on the BSE. In Indiabulls Power, LN Mittal?s LNM India Internet Ventures holds a 10.7% stake, while PE firm FIM holds 17.9%.
But Manu Punnoose, MD, Subhkam Capital Ventures Ltd, says there is nothing to worry about such price declines. ?Trading in newly floated shares is not done for a short-term benefit, though the decline may dampen retail investors?, he told FE. The aggressive IPO pricing could be another reason for the decline of share prices, he said. Subhkam holds about 4% stake in Aqua Logistics, which has filed IPO papers with Sebi this month.
