Shares of Shemaroo Entertainment Limited listed on the bourses and in the price discovery the shares which were issued at Rs 170, the price discovered was Rs 180. What happened thereafter speaks poorly about the company and is something which needs to be looked into by the exchanges and the regulator.
The company had raised Rs 120 crs in a price band of Rs 155-170 by issuing fresh shares. There was a discount of 10% for retail investors. The issue was oversubscribed and received decent subscription across the various buckets. The overall subscription was 7.39 times and the retail subscription was 7.78 times implying that there would be a lottery in allotment to retail investors. So far so good. There were just two anchor investors in the form of HDFC and Birla SunLife. HDFC took a higher allocation of 55.55% of the anchor portion and the remaining 44.45% went to Birla. The allocation to anchor investors was higher under the revised rules and in this issue 60% of the QIB bucket was allocated to anchor investors. This effectively meant that HDFC took 16.67% of the total issue showing tremendous confidence in the business of Shemaroo Entertainment Limited. So far so good but the story does not end here.
In the price discovery session a total volume of 5.45 lacs shares took place with 3.77 lacs on the NSE and 1.68 lacs on the BSE at the discovered price of Rs 180. Thereafter in the next couple of minutes HDFC bought 2.5 lakh shares on the BSE at Rs 174.60 and 4.5 lakh shares on the NSE at Rs 177.04 and the stock was locked at the lower circuit filter of 171 on both exchanges. On the selling side the lone institutional trade was done by Morgan Stanley who sold 3,64,788 shares on the NSE at an average of Rs 176.87.
| TIME | NSE | Avg Price | BSE | Avg Price | |
| 10.00 AM | 377134 | 180.00 | 168280 | 180.00 | |
| 10.30 AM | 924742 | 172.25 | 432307 | 172.61 | |
| 11.00 AM | 4433 | 171.00 | 2181 | 171.00 | |
| 11.30 AM | 775 | 171.00 | 30 | 171.00 | |
| 12 MOON | 684 | 171.00 | 125 | 171.00 | |
| 12.30 PM | 150 | 171.00 | 1 | 171.00 | |
| 1.00 PM | 1014 | 171.00 | 85 | 171.00 | |
| 1.30 PM | 530 | 171.00 | 285 | 171.00 | |
| 2.00 PM | 1189 | 171.00 | 130 | 171.00 | |
| 2.30 PM | 166 | 171.00 | 199 | 171.00 | |
| 3.00 PM | 126 | 171.00 | 485 | 171.00 | |
| 3.30 PM | 1265 | 171.00 | 758 | 171.00 |
The above table gives all the details of half hourly trade on both the exchanges and it is apparent that after the action in the price discovery and then the first few minutes of trade, a mere 14,611 shares were traded in the remaining five and a half hours of trade. It indeed is shocking for a first day of trade for a company being in the digital media space. Very clearly this writer and the public at large have not seen what the management sees or HDFC sees.
The trade data also shows that roughly 25% of the shares of the public offer were traded or delivered on the first day. The traded and delivery volume are the same because for the first ten days of trading the share would be trading in trade to trade which implies compulsory trading.
| Exchange | Open | High | Low | Close | Net Change | % Gain/loss | Wt. Avg | Volume | Delivery | Del %age | |
| BSE | 180.00 | 181.00 | 171.00 | 171.00 | 1.00 | 0.59 | 174.65 | 604876 | 604876 | 100.00 | |
| NSE | 180.00 | 182.00 | 171.00 | 171.00 | 1.00 | 0.59 | 174.51 | 1311237 | 1311237 | 100.00 | |
| Total |
|
1916113 | 100.00 |
From the above two tables a few questions arise. Firstly the trading pattern and the interest shown by HDFC in the company seems more than just genuine. One must also remember that in the past some deals of the fund under question have been questionable and raised eyebrows. Is this one such deal.
Second was information about the impending purchase by HDFC known to management of the company? This question arises because it seems like a well-planned move to take the price in the price discovery session to a level which was just above the 5% level so that god willing if there was selling post price discovery, there would be solace in the fact that the share is trading at a premium to its issue price. Finally where did the bullishness of the fund disappear when the share was trading at lower circuit and available at a price which was lower than what it was when he purchased on the NSE by Rs 6 or 3.5% and Rs 3.60 or 2.1% on the BSE.
One is not sure whether there ever would be answers for these questions or only a probe by the regulators would bring out the true facts. Trading would begin on Tuesday and it would be interesting whether the share trades or is locked at circuit. One must remember that for the first 10 trading sessions it is in trade to trade and with 25% delivered on the first day and another 30% locked in anchor allocation with a 30 day lock-in, a mere 45% of the issue is available for delivery.
In conclusion after the bumper success of Snowman and Sharda Cropchem, this issue seems to becoming the disaster for 2014. Only time will tell what kind of damage to the sentiment this performance by Shemaroo would do in the primary market. Thank God for the fact that allotment in retail was by lottery of just the minimum lot of 85 shares and with the 10% discount, investors still have two days to exit assuming locked down share and the discount is considered.
Shemaroo was a disaster and a lot of people will have to explain what went wrong.
