Readymade Steel Limited which had tapped the capital markets with its issue in a price band of Rs 90-108 was subscribed an overall 1.68 times. The issue raised Rs 3474.53 lacs. The IPO was open from Monday the 27th of June and closed on Wednesday the 29th of June. The issue received very poor support from QIB’s and was subscribed a mere 0.03 times and received subscription for 62,580 shares. The bulk of the subscription came from the retail category which was subscribed 4.18 times.
The details of the subscription level in various categories are given below: –
| Category | Shares Offered | Shares Subscribed | Times |
| QIB | 1930294 | 62580 | 0.03 |
| NII | 579088 | 793560 | 1.37 |
| Retail | 1351206 | 5647680 | 4.18 |
| Overall | 3860588 | 6503820 | 1.68 |
The company is in the business of business of processing of steel used in the construction industry. The company had reported a topline of Rs 81.45 crs in the nine months ended December 2010. The price earnings multiple of the company were in a price band of 36 times at the lower end of the band and 40.91 times at the upper end of the price band.
SEBI is talking about the track record of merchant bankers be disclosed in the offer document. When the same would be implemented is unknown but for the benefit of the readers an attempt would be made to inform about the same.
Arihant Capital Markets Limited was the merchant banker of this company. His earlier issue which is yet to list was Birla Pacific Medspa Limited. The earlier issue to that was Sanghvi Forging and Engineering Limited. The issue price band was Rs 80-85 and the issue was overall subscribed 1.30 times. There was not a single share subscribed to by QIB’s. On the price performance front, the share listed on the 23rd of May and made its high of Rs 144.90 on the sixth trading day and closed that same day at the lower circuit of Rs 96.65, down 20%. The share closed on Friday the 1st of July 2011 at Rs 46.10, a loss of Rs 38.9 or 45.76% from the issue price. If one were to consider the fall from the peak level, the same is Rs 98.80 or even more than the issue price.
The point that I am trying to highlight is that these issues which do not have fundamentals are brought with very high valuations, manage to be subscribed through “friendly intermediaries” and then leave investors high and dry who in turn blame the system.
I hope investors start realising how they are being fooled.
