Experts say a number of firms trying to encash market euphoria
The share price of two companies that listed after their initial public offers (IPOs) fell sharply on Friday. While the stock of Orient Green Power was down 4.25 per cent, Ramky Infrastructure fell 14 per cent.
Among other recently-listed IPOs, Indosolar Ltd is trading 24 per cent below the issue price, while Tipupati Inks is down 61 per cent, Aster Silicate 56 per cent and Micro Sec Finance 13.5 per cent.
According to analysts, a little over 50 companies have filed prospectuses with the Securities and Exchange Board of India, but investors are circumspect.
“Most promoters and investment bankers are trying to cash in on the market euphoria. IPOs worth Rs 77,000 crore are ready to hit the markets in the next three-four months. Only a few like Coal India could get a good response,” said Kishor Ostwal, managing director of Mumbai-based CNI Research.
“Operator activity seems to be high in some recently-listed small IPOs,” said another Mumbai-based broker.
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The stock of diversified infrastructure and waste management solutions provider Ramky Infrastructure closed at Rs 387 on the Bombay Stock Exchange and Rs 388 on the National Stock Exchange (NSE), compared to the issue price of Rs 450 per share. Ramky Infrastructure raised Rs 530 crore through the issue, which was subscribed 2.89 times.
The company is backed by IL&FS Private Equity and Sabre Capital, which had invested four years earlier. Despite Friday’s fall, it is sitting on a substantial gain. IL&FS PE made a part-exit with 2.6-times returns on its four-year-old investment (through Tara Fund). Sabre Capital, which invested through Sabre Abraaj Fund-I, is also sitting on substantial gains, as its average cost of purchase is pegged at Rs 180 per share. Sabre Capital and IL&FS PE together invested around Rs 125 crore, of which three-fifth was invested by Sabre Capital in December 2006.
At the current market price, the company is valued over Rs 2,200 crore ($515 million). Angel Broking had a ‘subscribe’ rating on the issue, while Sharekhan said long-term investors could see it as a good opportunity, though it was expensive.
The share price of renewable energy company Orient Green Power, backed by Bessemer Venture Capital and Olympus Capital, fell 4.25 per cent to Rs 45, against the issue price of Rs 47. Orient Green Power, which raised Rs 900 crore from its IPO, is 36 per cent owned by Shriram EPC. At this price, the company’s market cap is around Rs 2,100 crore. It had raised Rs 900 crore through the public float.
The principal backer of Orient Green is Shriram EPC, which in turn is backed by investors such as Bessemer and New Vernon. The single-largest shareholder of Orient Global is a Singapore-based firm, Orient Green Power Pte, which owns a 56 per cent stake. It is a three-way joint venture between Shriram EPC, Bessemer and Olympus Capital.
The share price of another IPO, Electro Steels Ltd, closed at a 3.63 per cent premium to its issue price of Rs 11 on NSE. Electro Steels’ issue was subscribed 8.23 times. The company raised Rs 400 crore through the IPO.