The DB Realty initial public offer (IPO), which closed on Tuesday, failed to mop up adequate subscriptions from retail portion of the issue which was subscribed to the extent of 0.36 times. The Emmbi Polyarns IPO, which closed on Wednesday, also failed to attract enough interest from retail investors and as a result, retail portion was subscribed only to the extent of 0.45 times.
Of the six IPOs that have hit the markets since the start of 2010, half have failed to garner full retail support. This could put the remaining IPOs in jeopardy. ?With the markets looking volatile, issues will tend to get postponed,? said Prithvi Haldea, chairman Prime Database.
According to a source close to the development, Lodha Developers, which planned to raise around Rs 3,000 crore, has deferred plans ahead before the markets stabilise.
Merchant bankers believe that issuers will be compelled to make the pricing more attractive. ?This expected correction has two-pronged effects. While it made the task of valuation and pricing of IPOs tough for companies, it has an adverse psychological impact on investors who just got out of recession fear,? said Munesh Khanna, CEO & managing director, investment banking ? Centrum. Earlier, even issues from big names like JSW Energy and Godrej Properties, which were priced at the lower end of the band, saw lower retail participation. Nilesh Shah, deputy managing director, ICICI Prudential AMC, has observed that the subdued retail interest could mean a more fair price for forthcoming IPOs.
According to Prime Database, there are around 19 corporates lined up to raise around Rs 45,000 crore from the primary market. And, around Rs 14,250 crore are being planned to be raised through the initial public offer route till the end of the year. However, merchant bankers feel, volatility begets uncertainty in the market. Unless it comes down considerably, time is not ripe for good IPO pricing of different companies.