3 of every 4 IPOs trade below issue price

2007 saw investors making big bucks with 9 out of 10 major public issues helping rake in the moolah. But 2008 has been quite the opposite. Out of the 40 companies that were listed this year, 32 are trading below their issue prices (ie at lower prices than was offered to the public), a TOI analysis shows.

The average initial public offer (IPO) has lost 31% from its date of listing this year, in line with the correction in broader market indicators such as Sensex that has lost 36% in the last nine months. IPO investors, who still hold shares, in companies such as Porwal Auto, Niraj Cement, Tulsi Extrusions, Manaksia, KNR Constructions, Precision Pipes etc. will be ruing their fate. As these are some of the names which figure in the biggest losers. They are not alone.

Two out of four IPOs are available at cheaper prices in the range of 40-80 % than their issue prices, data shows. “The end part of 2007 and the early part of 2008 were clearly times where the market accepted a lot of excess... in terms of valuation , price asked and unrealistic prospects. Indian stocks might have taken beating but correction is what has happened for some of the IPOs,” said the research head of a foreign brokerage house.

Just a few IPOs, eight of them in fact, such as tech firm Vishal Info, pharma company Anus Labs, textile firm Bang Overseas and Gokul Refoils have managed to give positive returns, data shows. “Still investors should do their due diligence before buying beaten down IPO stocks. A mere 50% below issue price is not the only indicator for buying a stock. The IPO (primary market ) is a clear reflection of what is been happening in the secondary markets,” a senior market analyst said.

The absence of any sector bias towards the correction of stock prices that has happened post-listing for 2008 IPOs is also worth the mention as companies involved in construction , information technology , infrastructure, healthcare , telecom all have casualties , the analysis reveals.

The only good news for investors could be that recently listed IPOs have had a fairly good experience than their earlier counterparts. “The onset of correction and lack of appreciation for the rich valuations demanded earlier might have compelled lead bankers and promoters to leave more on the table,” the research head of the foreign brokerage reasoned.