The secondary markets have been on a roll and as the calendar year 2012 comes to an end have plenty to cheer about. The primary market on the other hand needs to recover even now and if one goes by what SEBI chief Mr U.K.Sinha said at the AIBI meeting where merchant bankers were compared with match makers, a lot needs to be done. He said that merchant bankers spoke about the groom (company raising capital) and wanted to extract higher dowry from the bride (price from the public) and praised him for virtues which need not be there. The basic point that was made was that pricing is an issue and until and unless merchant bankers and promoters leave something on the table, the primary markets will not revive.
The week beginning today which has a trading holiday on Tuesday on account of Christmas would see three news listings during the week. They are CARE which would happen on Wednesday the 26th, PC Jeweller on Thursday the 27th and BhartiInfratel on Friday the 28th. Each of these three issues was different in nature and would trade differently post listing.
CARE is the rating agency and would be the third rating company to be listed post CRISIL and ICRA. The issue was an offer for sale by existing shareholders and there was no fresh issue of shares. The issue was in a price band of Rs 700-750 and received excellent response. The pricing was at a discount to the listed peers and there was a straight comparison between the issuer and listed peers. The issue was oversubscribed over 111 times by HNI’s and 46 times by QIB’s. The retail portion was subscribed 6.18 times but with a difference. The allotment rules for oversubscribed issues in retail portion have changed and one is allotted the minimum lot either to all applicants or by lottery and it is only after every applicant is allotted shares and shares remain thereafter that additional allotment is made. Keeping this in mind the issue received 3.3 lac applications and the allotment was to 101 applicants out of 256. Considering the oversubscription and the grey market premium, one would expect this share to trade around the 925 mark in a range of Rs 20 on either side. Clearly this issue has been a success on all parameters. The issue size of Rs 540 crs raised just under Rs 19,000 crs.
PC Jeweller would be listing on Thursday and had raised Rs 609 crs in a price band of Rs 125-135 with a discount of Rs 5 to retail investors. The issue was oversubscribed 6.85 times with the QIB portion subscribed 7.33 times, HNI portion 18.12 times and retail portion 1.68 times. The retail portion received bids for the minimum quantity and here again there would be firm allotment for almost all applicants. Retail now understands the new norms of allotment and the oversubscription would be comparatively lower in this category going forward. The issue received poorer response than anticipated and the poor listing of Tara Jewels at the time that PCJ issue was open for subscription did not help matters. The company raised Rs 6,300 crs. The issue should trade in the range of Rs 140-150 on listing day.
The third issue from Bharti Infratel would list on Friday the 28th of December. The issue consisted of a fresh issue and an offer for sale of 18.89 cr shares in a price band of Rs 210-240. There was a discount of Rs 10 for retail investors. The issue was ‘managed’ with subscriptions from QIB’s completing the subscription. They subscribed the issue 2.84 times while HNI’s and retail chipped in 0.29 times and 0.19 times their respective buckets. The issue was priced at Rs 220. The company raised Rs 4,184 crs from the issue and the company received bids for a total of Rs 5,200 crs. Looking at the poor response to the issue from half the people i.e. HNI’s and retail it appears this issue is unlikely to fair well post listing. There is also an overhang and history behind the group’s earlier listing of BhartiAirtel. The share listed at a discount and traded at a discount for 11 months and returned to par value another seven months later. In all it took the company 18 months to trade at a premium. Incidentally at its lowest level the share traded at a discount of over 60% to its issue price. I believe the performance of BhartiInfratel post listing is not going to be great and considering that retail investors cost per share is Rs 10, I believe this share would trade in a range of Rs 195-210 on listing.
Have a great week ahead with three new listings and plenty to look at.
