Tech Mahindra, GMR: A tale of contrasts

GMR Infrastructure and Tech Mahindra hit the markets when the sentiment for public issues was at a low; both raised hopes of a revival and both got listed when the markets turned around. But the similarities ended there.

Tech Mahindra, which listed on the bourses today at a premium of 42.7 per cent, turned out to be a blockbuster while GMR Infrastructure, listed last week, is managing to just float above the issue price.

The retail portion of GMR Infrastructure was undersubscribed while this segment was oversubscribed by about 8 times for Tech Mahindra.

"The success of the Tech Mahindra IPO augurs well for the primary market. A major highlight of this issue is that investors have become very choosy when it comes to putting money in an IPO," said Frank Hancock, managing director of ABN AMRO Asia Corporate Finance, one of the lead arrangers for the Tech Mahindra IPO.

Tech Mahindra today got listed at a premium of Rs 156 or 42.7 per cent at Rs 521 per share, compared with the issue price of Rs 365.

The shares closed at Rs 554.25, valuing the company at $ 1.4 billion on a one-year forward price to earnings ratio of 17. This is a premium to the valuation of its peer, Patni Computers, and comes closer to leader i-Flex.

In contrast, GMR Infrastructure, which priced its IPO at Rs 210, was listed last week at Rs 213. Currently, its shares are now trading at a premium of about six per cent at Rs 224.

"It is not fair to compare GMR with Tech Mahindra. GMR is a long-term story," said an executive with Enam Financial, the lead banker of GMR Infrastructure issue.

The issues hit the market after the meltdown in stock prices in June, impacting badly on the till-then buoyant IPO market.

Air Deccan's IPO barely managed to get scrape through (after extending the issue closing date), but it was a flop on listing. Its shares were listed at a discount of about 50 per cent to the issue price of Rs 148; the prices are now trading at a discount of 44.25 per cent at Rs 65-levels.

Three IPOs that followed Air Deccan "� Vigneshwara Exports, Blue Plast Industries and Shirdi Industries, failed to evoke any interest among investors, forcing the bankers to pull out these issues.

"Credit should go to the management for pushing through the IPO during a lean phase," said S Ramesh, head of equity products group, Kotak Mahindra Capital, which was also a lead manager for the Tech Mahindra IPO.

"We have not predicted this overwhelming response to Tech Mahindra IPO. All credit should go to investors."