The Hindu Business Line : Public issues fail to bring cheer

AFTER raking in the moolah on public issues last year, investors are finding the going tough in the current fiscal as the trend so far has not been not so good, with the returns figuring either on the negative side and if at all on the positive, only marginally so.

A majority of the IPOs that hit the market in 2005 have provided returns of less than 10 per cent so far while in some cases the shares are trading below the issue price. The only exceptions this year have been Gokaldas Exports and Gateway Distripark while Jet Airways has also provided returns of around 20 per cent.

Among the issues that are quoting below the issue price is 3i Infotech. Having listed above the issue price of Rs 100, it soon began dipping. On Friday, the stock closed at Rs 94.60 on the BSE, thus giving negative returns of 5.4 per cent.

Similarly, Shringar Cinemas could not trade above the issue price, closing at Rs 49.75 on Friday, the issue price being Rs 53. Jaiprakash Hydro stock is down by 10 per cent with its shares closing at Rs 28.75 on Friday compared to issue price of Rs 32.

In comparison, 2004 was a great year for investors in the primary market with most issues listing at premium to the issue price. Many of them have returned more than 100 per cent till date. The big-ticket issues that hit the market like TCS, NTPC, ICICI Bank and ONGC are still quoting above the issue price. The smaller issues like Spanco Tele, Power Trading Corporation, Petronet LNG and NDTV have provided returns of more than 100 per cent.

Brokers and analysts attribute the low returns this year to the secondary market not doing well.

"Since the beginning of this year there has been high volatility in the stock market. Moreover, after touching all-time high in March, most of the stock prices have fallen. Since the secondary market has not done well, it is difficult for new issues to list at premium to the issue price," said a broker.

A top official of a broking firm involved in mobilising large funds through IPOs said: "This year, most of the companies that hit the primary market priced their issue very aggressively leaving little room for investors."

The companies that priced issues well have fared better even in this situation, he said.

Several players said the low FII inflows this year compared to the year-ago period are also a key factor for minuscule returns.

This year net FII inflows in equity till May 5 stood at Rs 15,716 crore compared with Rs 18,760 crore till May 6, 2004.

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