Fineotex Chemical Limited listed on the BSE on Friday and had a great debut on day one. The share listed at Rs 80. The stock made a high of Rs 157.90 and a low of Rs 74.10. The stock closed at Rs 140.90 with a gain of Rs 68.90 or a staggering 95.69%.

The company had tapped the capital markets with its IPO for 42,11,160 equity shares in a price band of Rs 60 to 72. The issue was subscribed 1.57 times. The issue could not garner a single bid from QIB’s and the HNI portion was subscribed to the extent of a mere 22%. The retail portion was subscribed a staggering 4.38 times. This company chose to have any road shows to market its issue but was able to attract substantial retail interest because of the “MANAGED” nature of the issue. Application forms were bought in large numbers.

The company had a turnover of Rs 13.38 crs in the first six months of the current year ending March 2011 and the current market capitalisation based on the closing price of Rs 140.90 would be a staggering 158.22 crs, or 5.91 times the annualised sales. This number is simply unbelievable and such things can only happen in India.

BASF one of the companies that Fineotex compared itself with has a market cap of Rs 1985.50 crs and a nine month turnover ending December 2010 of Rs 2024.26 crs, which means it enjoys a market cap to turnover of ratio of approximately 0.73. I believe something is grossly wrong in the market place and the regulatory bodies whether it be the Stock Exchanges or SEBI need to look into this matter and other such companies that tap the capital markets, play with the investor and ensure that at the end of the day many more investors who have been cheated, left in the lurch become disillusioned about this market.

Coming to the trading day, the share saw volumes of 345.91 lac shares which is 8.21 times the IPO size of 42.11 lac shares. The delivery volume was 42.40 lac shares which was 12.26% of the traded volume but surprisingly a little more than 100% of the IPO size. Clearly people have gone short looking at the rise in the share price and at the extremely poor fundamentals of the company. This fact of people having gone short and being trapped is also borne out from the fact that the share has by and large been on an uptrend through the day but for a brief fall around 2.45 pm and 3 pm onwards the share rose sharply from 120 levels to touch a high of 157.90.

The weighted average of the day’s trade was Rs 117.94. Even though the share had no fundamentals, investors who put their money in the share have made decent money. It is this return that causes them to invest and get caught. Readers would recall a recent issue Shekhawati Poly Yarn which crashed from a high of Rs 69 to just about Rs 30 in the last half hour of trade. The merchant bankers for both these issues were the same.

In conclusion because of the fact that there is a short delivery which has happened there could be some more upward movement in the share but investors should not get carried away as even at these levels the share is already overvalued.