What was considered to be an excellent step in favour of retail investors boomeranged? The cut-off price as prevalent in IPO’s was introduced in OFS for the first time to make life easier for retail investors. What actually happened was that not a single share was allotted at cut off as the issue was subscribed at a substantially higher price itself. From the table below it becomes apparent that though the cut-off price was Rs 254.10, investors (traders) bid for the share at Rs 261.90 which was a premium of Rs 7.80 or 3.07%. The government was to give a 5% discount on the cut-off price or the price at which shares were to be allocated. Assuming the price to be allocated calculated as Rs 261.90, the discount was Rs 13.09 or Rs 248.81. These traders surrendered Rs 7.80 of it or roughly 60% of the discount and sold shares in futures.

From the table above it is clear that the issue received excellent response and the price hammering that was the norm in earlier issues did not happen. The cut-off was an excellent introduction but the greed of market traders saw those sacrificing 60% of the discount and content with the balance for petty gains. The true investor lost out.

One can be sure that there would be some modifications in future issues where the investor would be protected.