In a bid to protect investors? interest and enhance compliance level among market intermediaries, the market regulator Securities and Exchange Board of India (Sebi) has proposed to enforce the disclosure of track record of merchant bankers in the current fiscal.
The regulator wants the book running lead managers (BRLMs), more commonly known as merchant bankers or investment bankers, to display their track record ? post-listing performance of share-sales handled by them ? upfront to investors. By doing this, investors will be able to take an investment call based on merchant bankers? history ? how issues handled by them have fared in the past.
Meanwhile, the initial public offerings (IPO) market has started picking up though many of the companies that listed in the financial year 2010-11 haven?t fared too well. The year 2010-11 was important as a lot of money was raised. However, nearly 70% of the IPOs are trading below their issue price.
The table highlights the ten worst-performing IPOs of FY11 and the names of merchant bankers who handled them. Gyscoal Alloy, which raised a little over R50 crore through an IPO in October, is currently down about 78% from its issue price. The IPO was handled by Chartered Capital & Investment. The third worst-performing IPO ? Sea TV Network, which is currently down by about 75%? was also managed by Chartered Capital. The ten worst-performing IPOs, are mostly small-sized issues but it’s not just the smaller issues that haven’t fared well.
Some mid-sized and well-marketed IPOs handled by leading merchant banks are also down more than 40% from the issue price.
For instance, the R2,262 crore Jaypee Infra issue, the second-largest after Coal India, which was managed by nine leading merchant banks, including Enam, Morgan Stanley, JM Financial and ICICI Securities, is currently down 40% from its issue price. Also, the R900 crore offering of Orient Green Power, which listed in October, is down 42% from its issue price. The issue was managed by Goldman Sachs, UBS and JM Financial.
Sebi has in the past been very critical about IPO pricing and has time and again urged merchant bankers to price IPOs appropriately so that some gains are left on the table for investors.
The board of AMBI, an industry body for merchant bankers, will be meeting in the second week of May to discuss implementation of disclosure track record.
The information on merchant bankers and how the issues have performed is something which is already available in the public domain. But small investors might find it a bit difficult as well as time consuming to get access to this information. The disclosure of track record norm will help investors easy access to this information and will also make merchant bankers more accountable.