One more issue, one more listing day and yet one more disappointment. Very clearly it appears that not only IPO’s in general but power companies IPO’s in particular are a disappointment for all categories of investors. First it was Adani Power, then it was NHPC and now finally it is Indiabulls Power.Issue after issue is turning out to be a disaster for the investing public. Adani Power issued shares at Rs 100 and listed on 20th August 2009, when the BSESENSEX was at 15012. NHPC issued shares at Rs 36 and listed on 1st September when the BSESENSEX was at 15551. The BSESENSEX as of Fridays close is trading at 15896 a gain of 884 points or 5.89% compared to Adani Power’s listing day close and 345 points or 2.22% compared to NHPC’s listing day close. The two stocks are trading lower than issue price with Adani Power at Rs 97.80 a loss of 2.2% and NHPC at Rs 30.50, a loss of 15.28%.
Indiabulls Power was expected to do well and after having received an overwhelming support from Institutional investors where the issue was oversubscribed over 40 times one expected a decent performance. What happened in reality was completely different and unexpected. It appears every issue hitting the market is generally over-priced. Promoters and merchant bankers create some sort of hype in various forms be it advertising, positioning, road shows, reports on the future of the company and attractive incentive schemes to lure investors. The name of the game is get the issue subscribed by all means. The use of the grey market, the scheme where a retail investor can sell his application form at a fixed price are all tools used to attract investors. QIB oversubscription is yet another way of creating hype and interest in the market.
If all this is not enough, and if the issue has not done well, then ‘arrangements’ are made where the issue just gets subscribed and a deal is struck at a substantial discount to the book built price. If all goes well the issue on listing does well, all institutional investors get an exit, other investors are happy and the fixer makes a killing. A few days after the issue is listed the share starts falling and those left holding the baby are left to fend for themselves. In case the issue is not handled well by the fixer the share tanks on the first or second day itself and there is mayhem all around. We have seen all of this in the issues which have listed in the last few months and without taking names of the companies would be aware of the companies being referred to.
Let us now come to Friday’s listing of Indiabulls Power Limited. The retail response was muted, the Non-institutional investor lukewarm but the Institutional investor interest was stupendous. With an allotment of a mere 2.5% of shares allotted, it would be reasonable to assume that the share would trade around par value in the worst case scenario. What happened in reality was that for a split second or maybe a few seconds that happened and then the share slipped into a deep fall and though it recovered from the lows, enough damage was done for there to be any meaningful recovery. From the table below the details of traded volume of 27.66 cr shares show that this was almost equal to the shares issued and the delivery figure of 8.68 cr shares were a high percentage of 31.4% of traded volume and 31.2% of issued capital.
| Exchange | Open | High | Low | Close | Net Change | % gain | Wt Avg | Volume | Delivery | Del % age |
| BSE | 44.95 | 45.50 | 35.00 | 39.25 | -5.75 | -12.78 | 39.42 | 102761429 | 22757165 | 22.15 |
| NSE | 45.05 | 45.05 | 35.35 | 39.50 | -5.50 | -12.22 | 39.55 | 173896784 | 64102097 | 36.86 |
| Total | 276658213 | 86859262 | 31.40 |
There was decent institutional support from two of them who have together bought 3.78 cr shares or a staggering 45.5% of total shares offered for delivery on day one. The two institutions were HSBC Global Investments Funds Mauritius which bought 2.55 cr shares at an average of Rs 40.08 and JPMSL A/c Copthall Mauritius Investment Limited which bought 1.23 cr shares at an average of 39.68 per share. If we were to assume that these two had not bought, I am not sure where we would have ended the day- probably substantially below the Rs 39.25 and Rs 39.50 where we closed on BSE and NSE respectively. I believe this support helped the price substantially.
Coming to the lessons from these recent IPO’s and their subsequent listings, I am sure that the retail investor has learnt the hard way and even though memory is short lived, the after effects will remain for quite some time. NHPC listing saw OIL India receive poor support and now for PSU divestment of NTPC and REC and some more issues a carrot in the form of discount to retail investors is being talked about. Similarly for each promoter it is probably coming to the markets once in a lifetime, it is for the merchant bankers to realise that the market place is their bread and butter and if they kill the hen that lays the golden egg “the investor” who will help them?
The earlier this is realised by all, this will help the capital markets. In conclusion the disaster which was Indiabulls Power Limited makes me think that the issue was all about short-circuiting the investor with a 4400 volt shock and probably three such shocks in a row in the form of Adani, NHPC and Indiabulls has left not only the investor with a deep hole in his pockets, but has left the primary markets with bigger holes which may not fill up in a hurry.
