Think twice before cuddling up to IPOs

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Mumbai: Think twice before rushing to put money into the next 'hot initial public offering' (IPO). A statistic says that ten out of 16 IPOs that made their debut on the bourses this calendar year are quoting below their issue prices. But merchant bankers feel that the primary market is showing signs of a revival, reported The Economic Times.

"Unlike the earlier trend where any issue was oversubscribed, there is an element of caution today. In a highly volatile market, most investors prefer secondary market trade rather than primary market trade," said an investment banker with a leading domestic brokerage.

Industry experts insists that the new issuances and their performance on the bourses in the recent past need to be judged against the backdrop of whether the deal was announced before or after the market crash (January 21), significantly if the crash was taken into account in the IPO pricing.

An industry source said, "Most IPOs are priced to their peer groups. In the instance of Emaar and Wockhardt, their valuations were compared to their peers in a bear market."

Many stocks on listing were afflicted by the meltdown in share prices in the mid-January. BGR Energy, Burnpur Cement, Manaksia, Precision Pipes & Profiles Company, Aries Agro, Porwal Auto Components, Future Capital Holdings, Reliance Power, J Kumar Infraprojects, Cords Cable Industries, KNR Construction, On Mobile Global, Shriram EPC, Bang Overseas, IRB Infrastructure Developers and Tulsi Extrusions are the 16 issues that debuted in the calendar year 2008.

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