The stock of yet another little-known company, Inventure Growth and Securities, has come under the Securities and Exchange Board of India (Sebi) scanner following a surge in its share price on listing day.
The share price of the company, which managed to raise over Rs 81 crore through an initial public offer (IPO) last month, doubled in one hour between 2:15pm and 3:10 pm on Thursday.
The gains in the share were surprising, as broader markets were bleeding with the benchmark equity index Sensex of the BSE down for over one per cent. Market players said Inventure is among those IPOs where share price volatility has been high without any strong fundamental reason, stoking concerns of high manipulation in the counter.
The stock was listed on Thursday at Rs 117 on the National Stock Exchange (NSE), before touching a low of Rs 91.20. Later in the day, however, it zoomed even as the broader market witnessed weak sentiments. It touched a high of Rs 225, before ending the day at Rs 206.75 — up by nearly 77 per cent over its issue price.
The company is involved in providing trading services in equity cash and derivatives market, debt market, commodities and the currency futures segment. It is also into wealth management and distributions of financial products.
“The stock was offered at a fully diluted multiple of just under 40 and has now closed at a multiple of 70 times, which is unimaginable,” said Arun Kejriwal of KRIS. “Very clearly, the regulator needs to look into what happened in a span of 45 minutes when the share price moved by more than the issue price, to finally close with gain of more than 70 per cent.”
Some past IPOs, which had seen a sharp price rise and fall, include Shekhawati Poly-Yarn, Omkar Speciality, Aster Silicate and Tirupati Inks. According to market players, there was no reason for such huge gains in these shares. A majority of small company IPOs are pre-sold at a 50-60 per cent discount to operators, who rig the price to lure retail investors. Once the counter grabs attention, operators exit. These operators have become distributors of shares in the market for companies that are not sure of enough subscription, said brokers.
The shareholding pattern of Inventure showed that only a single foreign institutional investor (FII) was allotted 700,000 shares in the initial public offer (IPO). The company also has more than 14,000 retail investors as shareholders. The promoter holding post the issue is pegged at 48.02 per cent. The issue was subscribed 4.58 times, with the qualified institutional buyers (QIBs) category under-subscribed with just 25 per cent bids. The non-institutional investors category was subscribed 9.49 times and the retail investors category was subscribed 8.66 times.