IPOs disappoint on market debut

Mumbai: High pricing and adverse market conditions have taken away the listing gains that primary market investors were looking forward from listing of recently concluded initial public offerings of Spandana Sphoorty Financial and Sterling & Wilson Solar IPOs.

Sterling & Wilson debut on Tuesday was disappointing as the stock listed 9.48 per cent lower at Rs 706, much below the issue price of Rs 780 and Re 1 face value.

Sterling & Wilson finally closed 7.01 per cent down at Rs 725.35 on the BSE and 6.89 per cent down at Rs 726.20 on the NSE.

Spandana Sphoorty also made a weak debut as it listed at Rs 825 on the NSE, 3.6 per cent below its issue price of Rs 856. The stock on first day closed below the issue price at Rs 847.80 and lost another one per cent on Tuesday closing at Rs 839.60.

High pricing may have also impacted first day investors' response post listing for these two IPOs said analysts.

Both the above IPOs had received lukewarm response from primary market investors as Sterling & Wilson despite remaining under-subscribed at 0.85 per cent of total shares on offer while Spandana Sphoorty was subscribed 1.05 times total shares on offer.

"As the issue is entirely an offer for sale and the qualified institutional buyer or QIB portion is 75 per cent, Sterling & Wilson met the Sebi regulations criteria that QIB portion should be fully subscribed with 1.02 times subscription for QIB category," according to people managing the issue and close to the merchant bankers.

Also due to the recent market conditions and changes in the application process, the retail portion was not fully subscribed, they said.

The UPI (unified payments interface) has taken a new avatar - this time as a medium for applying to IPOs (initial public offerings).

Market regulator Sebi has made it mandatory for retail investors to apply only through the UPI (unified payments interface) route for the IPOs. Retail investors are not used to UPI and have to first register and then apply which has become a hurdle, brokers said.

However, the high pricing seems to have been the main culprit as subscriptions were quite muted for the two IPOs even from high net worth and QIB applicants.

A cartel is operating in the primary market which has led to high pricing of the IPOs in the last 10 years said a market analyst requesting anonymity. IPOs in the SME segment is limited to raising up to Rs 20 crore, other SMEs aiming to raise Rs 50 to 100 crore are shunned by the merchant bankers who are only interested in bigger IPOs, he said adding Government needs to encourage and help SMEs raise money from the market for pyramid shaped growth of the economy.