80% of IPO stocks trade at premium

Equity investors have something to cheer about from the bull run in the first half of 2007-08. The investors have seen their wealth growing by 39.6 per cent in the first half as the  Sensex, the benchmark index, has appreciated by over 32.6  per cent.

Investors in the primary market were not disappointed either. The 43 initial public offers (IPOs) that have been listed during the first half of the current year have also beaten the Sensex, posting average returns of over 40 per cent over their offer prices. Twenty public issues have posted gains of over 32.6 per cent over the offer prices.

Of the 43 new issues listed on the BSE between April and September 2007, 33 are currently trading at a premium over the offer prices. Of the 33, nine have appreciated by over 100 per cent each, while 15 gained between 25 and 100 per cent and the remaining nine stocks gave returns between 4 and 25 per cent.

Orbit Corporation, Everonn Systems, MIC Electronics, Gremach Infrastructure and ICRA are currently trading at more than three times the offer prices. The market prices of Vishal Retail, Time Technoplast, Nitin Fire Protection and Allied Digital Services have more than doubled from their issue prices.

Healthy valuations, post-listing, have been attributed to the overwhelming response from the subscribers, mainly qualified  institutional bidders (QIBs) and the retail participation. Of  the 43 new issues, as many as 18 IPOs were subscribed by over 25 times, while the remaining 25 were oversold between 2 times and 25 times.

The public offers of Vishal Retail, ICRA, Omaxe, Central Bank of India, Take Solutions and Simplex Projects were subscribed by more than 50 times each.

The boom in the realty sector saw five realty stocks, except the IVR Prime Urban scrip, trading over their offer prices. Orbit Corporation was the largest gainer, appreciating by 378 per cent over its issue price. The  company raised Rs 100  crore, pricing its shares at Rs 110 apiece. It is currently trading at Rs 526.05 on the BSE.

DLF and Housing Development & Infrastructure (HDIL) are trading at a premium over 25 per cent, while Omaxe and  Puravankara Projects are quoting at 8 per cent premium each to their offer prices.

However, the market prices of ten issues have declined by over 18 per cent each. Decolight Ceramics, Insecticides, Hilton Metals, KPR Mills, Asahi Songwon Colors and Alpa Lab are currently trading over 30 per cent below their offer prices.

Of the 43 IPOs, eighteen new issues raised more than Rs 100 crore (Rs 1 billion) each from the public. The six real estate companies collectively raised Rs 12,961 crore (Rs 129.61 billion), accounting for 74 per cent of the total funds raised during the first half.

DLF, whose public issue was the largest, collected Rs 9,188 crore (Rs 91.88 billion), followed by HDIL (Rs 1,485), Puravankara Projects (Rs 859 crore), IVR Prime Urban (Rs 778 crore), Central Bank of India (Rs 816 crore) and Spice Communications (Rs 520 crore). Fortis Healthcare, Motilal Oswal Financial Services and Advanta collected between Rs 200 crore (Rs 2 billion) and Rs 500 crore (Rs 5 billion).