Monte Carlo’s listing woes highlight fragility in primary markets

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Mumbai | Updated: Dec 20, 2014 1:19 AM

On Friday, the stock fell 18% after listing at a 9.5%-discount to issue price of R645 per share. Increased volatility may cause more fluctuation and losses for investors

The sharp fall in the stock price of Monte Carlo Fashions on listing day indicates the frail state of Indian primary markets and the industry has a long distance to cover before it achieves consistent uptrend, say industry experts.

Monte Carlo plunged almost 18% on the NSE, after listing at a discount of 9.45% to the issue price of R645 a share on Friday. Shares of the Ludhiana-based branded apparel maker eventually closed at R567.30, down R77.7 ,or 12.05%. The issue listed at R584 apiece.

5graphPrithvi Haldea, CMD, Prime Database, said investors have appetite only for companies with good track record. “Valuations and pricing are important. There is still some time before you see a consistent pick-up in markets. More importantly, the growth of primary markets relies on stability and consistently upward secondary market, which is quite opposite of the recent market situation,” Haldea said.

Benchmark indices lost nearly 7% in roughly three weeks from their all-time highs in end of November and, then, recovered about 2.5% in the previous two sessions. India VIX, a measure of market expectations of near-term volatility and often called the market’s ‘fear indicator’, rose 16.3% on Wednesday, the biggest gain in 10 months. A day later, the India VIX index dropped 13.8% to see its biggest single day fall in seven months, data showed.

Experts said Monte Carlo Fashions may face more problems in the near term due to increased volatility in the secondary markets.

B Madhuprasad, chairman, Keynote Corporate Services, acknowledged that markets see ups and downs but it will not give immediate investments. “Investors will come only when there is a right type of investment opportunity. Investors look at stories of asset creation and growth, instead of exit opportunities to existing shareholders,” Madhuprasad said.

Through the IPO, Monte Carlo raised R350 crore. The offer comprised sale of 54.33 lakh shares, or 25% of the post-offer equity capital, including partial stake sale to existing shareholder Samara Capital through its investment firm Kanchi Investments.

Kanchi sold 7.57% (16.46 lakh shares) of the total 18.51% stake. Kanchi had earlier offered to sell 9.46% in the offer as per the draft prospectus, but decided against that as it did not see value in selling a larger quantum in the public issue.

Sebi had cleared the offer on September 12, and the issue was slated to hit the markets in end of September to early October. However, it was delayed due to difference of opinion between investment bankers and promoters over pricing, FE had reported earlier.

Monte Carlo was the fifth company on the main board to hit the bourse this fiscal. Four companies — Sharda Cropchem (R351 crore), Snowman Logistics (R197 crore), Wonderla Holidays (R181 crore) and Shemaroo Entertainment (R120 crore) — have tapped capital markets so far in FY15. IPOs worth R7,000 crore, either with valid Sebi approval or seeking one, are waiting to hit the markets in the next six to 12 months, data show.

“If you do these deals, investors will not return to IPO markets. You will kill the goose even before it lays the golden egg,” said a top official of a large domestic investment banking firm, who did not wish to be quoted.

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