Shares of Repco Home Finance Limited listed on the 1st of April popularly known as “All Fools Day” on the BSE and NSE. The company had come out with its IPO for 157.20 lac shares in a price band of Rs 165-172 between the 13th and 15th of March. The issue was subscribed with the help of QIB’s and HNI’s, Retail and employee portions remained undersubscribed. The employee portion undersubscribed is a little shocking as they were given a discount of 10% to the issue price.

The discovered price on the NSE was Rs 165 after which the share made the high of Rs 176 on the BSE and Rs 175.90 on the NSE. The lows were made in the last 15 minutes of the day. The share was trading well and it cracked at around 2.30 pm and failed to recover thereafter. The weighted average of the day’s trade is Rs 166.90 on the BSE and Rs 168.02 on the NSE.

The total traded volume on the counter was 108.22 lacs which was 68.84% of the IPO size. The delivery volume was high at 38.76 lac shares or 35.82% of the traded volume. This delivery volume corresponds to 24.66% of the IPO size. There have been two institutional trades on day one with Master Trust Bank of Japan buying 7.99 lac shares at an average price of Rs 170.82 and Merrill Lynch Espana selling 8.48 lac shares at an average of Rs 170.73. These two trades more or less cross out each other but still do not explain why with retail and HNI’s not there to create any listing day pressure, the share cracked. These trades also explain the high delivery percentage.

The explanation of the fall lies in the fact that the share was overpriced on day one itself and is correcting to what should be a fair value. LIC Housing Finance which is a much larger and well spread out pan India company trades at a PE of approximately 12 times based on its 9 months annualised numbers ending December 2012 compared to an extremely high 15 times for Repco Home Finance. Also in terms of balance sheet size while LIC Housing has revenues of Rs 6,100 crs, that of Repco is a mere Rs 320 crs.Considering the size of the company a valuation of no more than Rs 140 based on present performance should be attributed to this company.

Looking at the listing performance of the share on day one it clearly appears that retail and HNI investors have turned smarter than promoters and merchant bankers think them to be. It’s one thing getting the issue subscribed through relationships but assuring investors that their wealth would not be destroyed or depreciated is critical in times when investor apathy towards the market is increasing day by day.

The promoter merchant banker combination and their greed whether it be a government company or a private company is showing no signs of reducing and is causing permanent and long lasting damage to the market place. One hopes sanity does dawn and overpricing reduces. To expect fair pricing would be asking for simply too much.

For investors it’s yet another case of a new listing from a government company and ironically fooling investors on “ALL FOOL’S DAY”.