The week gone by was full of events and even more eventful will be the week ahead. We had trading on Saturday the 6th of February, just one day after the closure of NTPC follow on offer. Last week saw Friday being a holiday. Maybe the Saturday trade was to compensate the Friday holiday this week or it was to catch short sellers in NTPC on the wrong foot. I believe nothing of that sort happened and neither purpose was achieved.
Jubilant Foodworks Limited the master franchisees of Dominoes Pizza in India listed on Monday the 8th of February. On Saturday the 6th of February they released their December quarter results and also gave guidance for the year ending March 2010. After listing on Monday, they had a conference call to discuss the results and during the conference call the company gave guidance about the business going forward. This was given for the next two years. I am sure this would be as per SEBI and stock exchange guidelines and regulations. What is really encouraging are the transparency levels that we are able to see in India. If this is permitted, why is it that only one Jubilant Foods has done this? Why do more companies going public not follow similarly and make the investing public more aware of the future? Just recently we had an analyst meet of a company going public which would be listing next week DB Realty which had made a statement that they would discuss and answer questions by holding an analyst meet 40 days after listing. Why 40 days after listing? Why not 40 minutes after listing?
NTPC follow on offer and French auction have not gone down well at all and have added to the bearishness in the market. Next week yet another FPO or follow on public offer from REC or Rural Electrification Corporation Limited opens. The floor price for the issue is to be announced by way of advertisement in the newspapers of Thursday the 18th of February as the issue opens on Friday the 19th of February. The government is caught in a catch 22 situation regarding the pricing as half the issue is to be sold at the floor price to retail and Non-institutional Investors while the other half is to be sold through a French auction to institutional investors. The catch is what the fair price is.
I believe the government looking at the experience of NTPC must take a bold decision. They must fix the floor price which is at a small discount to the current market price of Rs 222.75 and offer a straight discount of 5% to retail and non-institutional investors on that price. Even if the discount means that the government realises less, we must understand that we are inviting retail investors who will be allotted shares at an upper limit of just one lac this discount. We must remember that the maiden issue of REC was at Rs 105 and the share listed on 13th of March 2008, just under 2 years ago. If we are now planning to offer shares at almost double the price, retail investors have played a part in providing this sound base to the company. It must be brought out here that the price of REC fell from about Rs 140 to almost half at Rs 53.55 in November 2008. It was the retail investors who have stuck to the company and they are all citizens of the country. Secondly the bidding by Indian institutions should be done in a manner which forces other investors to bid higher than their bids if they desire allotment. In case retail and NII’s do not bid, then the institutions would not get shares at lower prices as happened in NTPC.
I firmly believe that talks which are again surfacing that trading in the futures and options segment of a share coming out with an FPO be suspended after announcement of price band or price floor until subscription of the issue is over is against the interest of the market and should not be considered or implemented. This would set a very bad precedent and would be detrimental to the health of the market and would allow people to take undue advantage of the same.
On the new listings front we have one listing ceremony on Monday of Vascon Engineers and another listing in the form of Syncom Healthcare Limited. During the week we will also have listings of Thangamayil Jewellery and DB Realty amongst others.
New IPO’s opening during the week includes Texmo Pipes and Products Limited on 16th of February, Man Infraconstruction Limited on Thursday the 18th of February and the FPO from REC Limited on Friday the 19th of February.
Plenty of action to be witnessed in the week ahead.
