Most IPCL, IBP, CMC bids at floor price

Investors seem to have perceived the floor price of the issues, which have started book building, as final price. The issues of IPCL, CMC and IBP have attracted most of the bids at floor prices.

This is in sharp contrast with previous issues, ranging from the most successful IPO of Maruti and just concluded Patni Computers, which evinced bids at considerably higher rates over the floor prices.

Information available till late yesterday evening revealed that 90.71 per cent bids for the IPCL issue were made at Rs 170 a share, floor price of the issue.

CMC has attracted 60.54 per cent bids at its floor price of Rs 475. Bids made at the floor price was 62.81 per cent in case of IBP. The oil marketing company has set a floor price of Rs 620.

If the data are any indication, the final prices of the issues, which would be discovered through book building, were likely to coincide with floor prices.

If not, at marginally higher than floor prices. Prior to these issues, the experience of the stock market was something different. The most successful Maruti IPO had ended up with final price of Rs 125, 8.69 per cent over the floor price of Rs 115 a share.

In case of Patni Computers, the final price was Rs 230 a share, ceiling of the price band. Analysts said if the volatility in the stock market continued, more bids would come at the floor price. Reason was: investors would like to subscribe the issue at a discount of the market price.

For example, the IPCL stock today closed at Rs 189.75 on BSE. The investors were judicious in discounting Rs 18, or 11 per cent, from the market price to apply for the public issue, an analyst said.

Interestingly, all the stocks ended the trading session at 10-11 per cent higher than their floor prices.

On BSE, CMC closed at Rs 526.30, 10.8 per cent over the floor price of Rs 475. IBP closed at Rs 684, 10.32 per cent over the floor price of Rs 620.

The reason was more palpable for retail investors who have to pay the application money upfront. QIBs and FIs need to pay only at the time of allotment.

"Therefore, if 10-11 per cent discount is not available from the public issue, retail investors can purchase shares from secondary market without getting his fund locked for at least 20 days. In addition, there is no risk of getting a substantial portion of his application refund in case the issues are oversubscribed," the analyst said.