Continuing with the recent trend, Prakash Steelage, the latest entrant on the bourses, got listed at a hefty premium on Wednesday. The stock price of the steel pipe manufacturer closed at Rs 184.9, up 68% over its issue price of Rs 110. It is the seventh company in a row to have made its capital market debut at a higher listing price as compared to its issue price. Listing gains is the difference between the issue price and the first day closing price of the stock. The listing gains for these companies have been in the range of 14-74%.
Earlier this month, Bajaj Corp had got listed at 18% premium while Midfield Industries and SKS Microfinance got listed with 16% gains. The initial public offerings (IPOs) of all these companies had got oversubscribed. For instance, Bajaj Corp got subscribed more than 19 times its issue size, while it was 13 times for SKS Microfinance. Investment bankers attribute this trend to right timing and pricing of the issue, coupled with buoyant secondary market.
? There is trading value assigned to a stock based on its business prospects. And there has to be a 15-20% discount between the trading value and issue price,? said S Venkatraghavan, director, IDFC Capital. ?You price the issue accordingly and there is likelyhood of listing gains.? ?Companies that are coming out with IPOs these days have reasonably good track record and are willing to compromise on valuations (offer price),? Prithvi Haldea, MD of Prime Database, said.
If a particular IPO gets oversubscribed, there is a lot of institutional investor interest post-listing as well, points out Venkatraghavan. ?As the IPO allotment is done on a proportionate basis, investors who miss out during the IPO try to buy after the stock lists.?
? There is a lot of buying on listing as current issues are under priced,? said Haldea.