Bharti Infratel Limited (BIL) listed on the BSE and NSE on Friday and had a disastrous start. The share was expected to do badly but it beat expectations on the downside. The company had a listing ceremony on both the exchanges and after opening at Rs 200 against the issue price of Rs 220 traded all the way to a low of Rs 188.70 on the BSE and Rs 188.65 on the NSE before a marginal recovery saw the share close at Rs 191.20 on the BSE down Rs 28.80 or 13.09%. On the NSE the stock closed at Rs 191.65, a loss of Rs 28.35 or 12.89%.

The company BIL had launched its IPO and offer for sale of 18.89 cr shares in a price band of Rs 210-240 with a discount Rs 10 per share to retail participants. To instil confidence in the investing public the company allocated shares to Anchor investors at Rs 230. The move failed and the company was forced to lower the price to Rs 220 when allocating shares. The issue failed to receive adequate response from either HNI’s or retail participants for whom half the issue is reserved. The company had to rely on ‘Qualified institutional investors’ to bail out the issue with the help of a battery of merchant bankers which totalled 13 in number. To add to the party there were three syndicate members who were roped in as well making the total a huge 16. The issue received support for just about 22% from retail and HNI’s indicating the maturity of this category of investors who chose not to subscribe even though the QIB subscription had ensured that the entire issue was subscribed.

This should be looked in comparison with the response which retail and HNI had in the issue for CARE and PC Jeweller. One should also remember that these issues are trading at a premium of 23% and 9% while BIL is trading at a discount of 13%. Surely retail and HNI have the sixth sense when it comes to discovering a fair price for a security.

From the table above one can see that the opening price was the high on BSE and on the NSE after opening at Rs 200, the high was made at Rs 200.85. The share thereafter was on a slide and made the low in the last hour of trade. The total traded volume was 502.93 lac shares which was 26.62% of the IPO size of 1889 lac shares. The delivery volume was 33.95% of the traded volume and 9.04% of the IPO size. There are no names of buyers or sellers which have been given in the bulk deals of the two exchanges. The weighted average of the day’s trade was at Rs 193.57 at the BSE and Rs 194.05 on the NSE which is higher than the closing price of the day. This indicates that the share was under pressure and would continue to remain under pressure in the days to come.

The track record of the group has been poor and history has repeated itself. When the parent BhartiAirtel Limited listed in February 2002 at an issue price of Rs 45, the share traded at a discount to the issue price for 11 months and it took another seven months to recover from the low of just about Rs 20 to trade at a premium. In short it took the share about 18 months to bottom out and trade at a marginal premium.

The PE investors of BIL invested in the company in December 2007 and March 2008 at an adjusted price of Rs 219.38 after adjusting for bonus issues. The IPO was at a price of Rs 220 which makes it at quits. There is however a big catch in currency terms as the PE investors came in at a dollar parity of 39 while currently the same is at 55 to the dollar, implying a loss of 40%. Very clearly when PE Investors who have the best brains and talent have lost 40% in 5 years at Rs 220, where would mere mortals like HNI’s and retail investors who are not capable of price discovery make money. I believe the senior officials of the company have very clearly underestimated the intelligence of the Indian Investor and need to apologise to them for their arrogance. One knows that the ‘QIB’ at times subscribes to issues under pressure and to maintain relationships only.

All in all it is indeed sad that the largest IPO in about two years has been a disaster on listing and very clearly the pricing of the issue was extremely expensive. It is no surprise that the SEBI Chief has been quite upset about the expensive valuations at which IPO’s are brought to the market and that almost 3 out of four issues in the last four years are trading at a discount. The earlier that merchant bankers and promoters take corrective steps and learn to be less greedy, I believe the good times in the primary market would return to the markets.

In conclusion, a disaster which was worse than expected.