 "IPOs: Don't go for listing gains")
This week, however, the tables have turned. Prabhat Dairy, which was planning to raise Rs 300 crore at the price range of Rs 140 - Rs147 per share, has had to bring down the pricing to Rs 115 - Rs 126 per share. Also, it has increased the closure date of September 4. With just 28% of subscription on September 1, the issue was going nowhere.
The uncertainty and high volatility in the stock market isn't giving investors too much confidence. But investors in most IPOs haven't lost money in the calendar year 2015. Out of the 37 IPOs, only 10 are trading below their issue price while 27 have given good returns (data as on Thursday closing).
And investors in three companies - Majestic Research Services, Raghuvansh Agrofarms and VRL Logistics have more than doubled their investments. The caveat: While VRL Logistics was priced at Rs 205 per share, Majestic Research and Raghuvansh Agrofarms' issue prices were Rs 11 per share and Rs 12.75 per share only, making them small stocks.
Says Kartik Jhaveri, director, Transcend India: "IPOs are a good way to make money for retail investors. So, whether it is a bull or a bear market, investors should look at them. But one has to read the companies' objectives very clearly."
According to Jhaveri, if there are companies which are offering a good pricing and raising money for acquiring land or property for expanding its business because they have to feed their growing business, it would be a good idea to invest in them.
"If the capital is being raised for growth, then it is a good business. Otherwise if they are going for an IPO so that one partner can exit or retire debt or augment working capital requirement, I would not go for such a company," he adds.
Agrees Deven Choksey, Managing Director, K R Choksey: "There are a number of issues in which there are pre-IPO investors who want to milk the issue. Avoid them."
Choksey believes that IPOs are an interesting option for the retail investor and do make investment sense. But pricing has to be taken into consideration.
"There is no universal answer to whether one should invest in IPOs or not. There are a lot of issues which are fully priced and don't leave much room for appreciation. So once they are listed, they fall sharply. There has to be a pick and choose approach."
Many retail investors approach the IPO market to make listing gains. That is, when stocks listed on the exchanges, many of them rise sharply, allowing investors to make a neat profit on the very first day or week.
But the reverse may also happen and the stock might tank trapping the investor looking to make a quick buck. Once you are convinced that the company is good and has potential to do well, invest in it for the medium or long term.