Boom time for Nov listings

In spite of a curb on P-notes and markets being generally volatile thoughout November, IPOs have bucked the trend by most of them getting listed at a premium. It seems that FIIs have entered more aggressively into primary market after this move.

There had been concerns about a slowdown in the demand for IPOs particularly from QIBs who bid in large chunk for these issues.

But almost all the issues in November have seen enormous investor interest.

Circuit Systems, the first IPO to get listed after the P-note scare, managed to get a decent premium of 20 per cent over its offer price. The issue was subscribed by 5.58 times.

S Subramaniam, head of investment banking at Enam Securities, said, "It all depends on the quality of IPOs. Good quality paper always attracts investors. Good quality here means, sound business model, reputable management, long-term prospect and pricing of the issue. Pricing is very important for an IPO and whatever issues we have seen recently have generally been good, excepting a few."

While markets have plunged by more than 5 per cent since the start of this month, public issues have done the trick by attracting huge oversubscriptions.

Religare's IPO was oversubscribed by 160 times, with retail portion being subscribed by more than 90 times and QIB 185 times.

Even gradings are being ignored by the investors and according to an investment banker, they have become like "risk factors" in the red herring prospectus which nobody generally goes through.

A recent example is Varun Industries' public offer which was rated with a grade of one on five by Crisil. However, it was oversubscribed by 40 times and got listed at a premium of 75 per cent over its issue price. Mundra and Kolte Patil's IPOs also got overwhelming subscriptions, 116 times and 2.69 times respectively.

Experts point out that there is enough liquidity in the market which is driving the primary market to its record highs.

In fact, according to a leading Investment Banker who did not wish to be named said, "Demand has exceeded supply in the primary market. Going forth, we are going to see more demand from institutions.Though we have seen weakening of flows since last few weeks, but that will hardly have any impact on good issues."

To put things in perspective, a majority of IPOs this year are trading at a premium to their issue price, with only 38 of them trading at a discount.

This shows overall positive sentiment for primary market issuances. With heavyweights such as Emaar MGF and Reliance Power waiting to hit the market, the street is expected to see some more power-packed action.