IPOs: All that glittered (Business Standard 12th Feb 2008)
Most market players point at grossly over-rated valuations based on earnings projected many years in the future.
The great Indian IPO fallout continues, as the Reliance Power’s IPO, priced at Rs 450 per share and which got oversubscribed 73 times, tanked as low as Rs 355.05, after listing at Rs 530 and touching even a high of Rs 599.90.
While the stock finally closed at Rs 372.50 on the Bombay Stock Exchange, investors have been hit hard. Not only have they lost a part of their capital, but those who took a loan to subscribe to the issue have lost a greater amount.
Although Reliance Power, which is the largest initial public offering (Rs 11,700 crore) so far on the Indian bourses, managed to evince spectacular interest, the shift in investor sentiment surfaced when meagre subscriptions to the Emaar MGF Land and Wockhardt Hospitals’ IPOs forced them out of the markets last week.
While the overall market sentiment has turned weak and played a big role in this debacle, most market stalwarts point at grossly overrated valuations, based on earnings projected many years in the future.
One may recall that in the case of Reliance Power, the company’s plan includes setting up power plants, wherein the major part of the projects would start generating revenues and profits only from year 2013 onwards.
The IPO pricing was also more than aggressive, when compared with existing segment leaders like NTPC and Tata Power. Wockhardt Hospitals’ IPO pricing too was equally aggressive. More
Most market players point at grossly over-rated valuations based on earnings projected many years in the future.
The great Indian IPO fallout continues, as the Reliance Power’s IPO, priced at Rs 450 per share and which got oversubscribed 73 times, tanked as low as Rs 355.05, after listing at Rs 530 and touching even a high of Rs 599.90.
While the stock finally closed at Rs 372.50 on the Bombay Stock Exchange, investors have been hit hard. Not only have they lost a part of their capital, but those who took a loan to subscribe to the issue have lost a greater amount.
Although Reliance Power, which is the largest initial public offering (Rs 11,700 crore) so far on the Indian bourses, managed to evince spectacular interest, the shift in investor sentiment surfaced when meagre subscriptions to the Emaar MGF Land and Wockhardt Hospitals’ IPOs forced them out of the markets last week.
While the overall market sentiment has turned weak and played a big role in this debacle, most market stalwarts point at grossly overrated valuations, based on earnings projected many years in the future.
One may recall that in the case of Reliance Power, the company’s plan includes setting up power plants, wherein the major part of the projects would start generating revenues and profits only from year 2013 onwards.
The IPO pricing was also more than aggressive, when compared with existing segment leaders like NTPC and Tata Power. Wockhardt Hospitals’ IPO pricing too was equally aggressive. More
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