Day one is a disaster

Tara Jewels which had tapped the capital markets with its IPO to raise Rs 179.5 crs through a fresh issue and an offer for sale which together raised Rs 179.5 crs listed on the stock exchanges yesterday. The price band was Rs 225-230 and the issue was subscribed 1.97 times. The IPO price was fixed at the upper end of the price band of Rs 230.

In the pre-open call auction time the company managed to have the equilibrium price discovered at Rs 242 or roughly 5.2% higher than the issue price. This higher price was the saving grace for the company as the price fell from these levels to the maximum level that it could fall and closed at the down circuit level of Rs 229.95 on the BSE and Rs 229.90 on the NSE.

From the table above one can see that the stock has had a total volume of 9.41 lac shares which means an addition of a mere 20,000 shares after the listing morning article in a time span of 3.5 hours. This volume is indeed pathetic and makes one wonder how it could happen on day one. The total volume reflects into a 12.06% of the IPO size and it means that 88% of the shares issued in the IPO still need to change hands. The weighted average of the day’s trade was Rs 238.84 on the BSE and Rs 236.44 on the NSE substantially higher than the day’s close.

From the price chart one can see that the price began falling immediately after the stock began trading from 10 am and by 10.45 am had hit the down circuit. Thereafter the stock was locked at down circuit for the remainder of the day. It would be interesting to note that USSL as trustee of Universities Superannuation Scheme was a big buyer of the shares and bought a total of 5,65,000 shares on the two exchanges combined at an average price of Rs 238.21. The fund bought 3.16 lac shares on the BSE and 2.49 lac shares on the NSE investing Rs 13.46 crs. Against these purchases there was sale by one HNI of 1.56 lac shares.

The above transaction makes one wonder that if there was no circuit filter or the fund was not a buyer what would have happened to the share. The technical looking at the delivery volume on day one and the price damage do not augur well for the share. I believe there could be further damage in the share prices in the coming few days.

There is another interesting angle to this issue as well. There is a conspiracy theory doing the round. P C Jeweller is tapping the capital markets with its IPO which would open on Monday 10th December and close on Wednesday the 12th of December. The company is raising Rs 609 crs at the upper end of the price band of Rs 125-135. The merchant bankers of the two issues are different and there is always tough competition between various players in the jewellery business. If the share price of Tara Jewels does not do well in the four days to the closure of P C Jeweller’s issue, there would be a negative impact on the issue prospects of the company. Similarly if Tara Jewels did well there would be an automatic benefit to PCJ. The theory goes on to explain that the share of Tara would be under pressure till at least the 12th of December when the issue of PCJ closes. Like I said this is a conspiracy theory and one that cannot be confirmed.

One last comment on Tara Jewels is that the issue has not lived up to the expectations that the share had created during its road show and has been yet another example of an issue biting dust on day one. This website had advised people from subscribing to the issue as the same was expensive and the stand taken has been vindicated.