Shares of Monte Carlo Fashions Limited listed on the BSE and NSE and in the very first lap crashed. Readers would recall that Monte Carlo is one of the venues where Formula one racing is held. Leaving similes aside, the debut of Monte Carlo leaves a lot to be desired. The issue was by way of offer for sale and received excellent response from QIB and retail but the support from HNI was missing. The overall issue was subscribed a healthy 7.83 times and the issue was allotted at the top end of the price band of Rs639-645.

The going was good so far and then the problems began. There were quite a few withdrawals even in the retail and some in the HNI category. The withdrawal is understandable as the premium which was there in the grey market at the beginning of the IPO vanished and then turned into a discount.

The discovered price of the issue was Rs 584 which was a discount of Rs 61 to the issue price. The greed of the promoters and the merchant bankers was apparent where even after having mentioned in the RHP that there is a provision of discount to retail investors they chose not to give the same. The share price has been falling every half hour as per the table annexed below. Secondly as one would see that over 40% of the day’s volume on NSE and 46% on BSE was traded in the first half hour.

Coming to the trading itself one finds that the total volume on the two exchanges combined was 76.02 lac shares which was 1.4 times the IPO size of 34.33 lacs. Considering that HNI participation was poor and the share traded gap down from the first tick of listing, retail too was out of trading, this is high volume. Delivery percentage at the end of the day was 13.95% of the day’s trade and 19.52% of the IPO size. This clearly puts lot of pressure on the issue in coming days.

What went wrong in the issue? The first and foremost is the pricing. The promoters and merchant bankers were greedy and wanted to milk the market considering that the SENSEX had zoomed in the calendar year 2014. Second they believed that the brand was so strong that people would lap it up. What they forgot is that Mumbai is a big market and the brand Monte Carlo is not present here. It’s not a very big issue but certainly plays on the mind of the people when the market leader KevalKiran is a home grown Mumbai brand and its “Killer” jeans are well known. The most important issue which was completely ignored by the promoters and of which they and they alone are responsible is there non-investor friendly attitude. Even profits made by the company are not distributed to shareholder and the approach is still of the good old days when the “Lala” ran his company the way he chose to. All these factors put together did the company in.

The share closed at Rs 566.40, down Rs 78.60 or 12.19% on the BSE while it was Rs 567.30, down Rs 77.70 or 12.05% on the NSE.

Lessons to be learnt from this issue for merchant bankers and promoters is that they must not be too greedy and must leave something on the table for the investor. It’s great when they say that we have done extensive roadshows and discovered the price after consultation. One knows exactly what they mean.

For the record book the only issue in 2014 to list at a discount, trade at a discount and close at a discount on day one. The disaster of 2014 is high profile well-knownbrand Monte Carlo and it certainly does not augur well for primary markets in the coming months. The failure of this issue will put future offerings and their merchant bankers under severe pressure with regards to valuation. Hopefully in the short term people will learn and the investor will benefit.

Merry Christmas.