Close almost 40% down

Shares of Brooks Laboratories Limited listed on the BSE and NSE on Monday the 5th of September which in India is also celebrated as “Teacher’s Day”. There was a glittering and well attended listing ceremony at the BSE which was used by family members as a photo opportunity moment. This company had chosen not to have any road shows or press conferences in any part of the country but certainly did not want to lose out on the opportunity of the photo shoot at the BSE Convention Centre, a beautiful venue.

The share opened at Rs 110 on the BSE and Rs 100 on the NSE respectively. The high of the day was Rs 131.10 on the BSE and Rs 131.60 on the NSE. The high was made in the first few minutes of trade of the day and the price was never seen again. The low of the day was Rs 60.20 on the BSE and Rs 61.50 on the NSE.

The issue had opened for subscription on Tuesday the 16th of August and closed on Thursday the 18th of August. The issue size was 70 lac shares and the issue was subscribed by retail investors and HNI Investors. These categories subscribed their issue portion by 3.36 times and 2.82 times respectively. There was not even a single bid from any QIB indicating the fundamentals of the company which had a grading of 2/5 by ICRA, confirming the below average fundamentals. The overall issue was subscribed 1.6 times with the help of “friendly” investors.

The scrip was virtually at its high in the first few minutes of trade, and kept on slowly and steadily losing ground continuously thereafter. Once the television interviews and the photo shoots etc were over and people left the convention centre around 10.30 am the stock had slipped into negative territory and continued its fall. By 12.30 pm the stock was trading at around Rs 80 and the fall simply did not stop. At around 2pm the final blow to the stock happened and a new level of Rs 60 was witnessed. Thereafter the stock was range bound and closed at the level of Rs 60.20 on the BSE and Rs 61.50 on the NSE. The low of the day was made. The low of the day was made around 3 pm of Rs 57.75 on the BSE and Rs 58.15 on the NSE.

The traded volume of the day was a staggering 746.53 lacs which is 10.66 times the IPO issue of 70 lac shares. The weighted average of the day was Rs 89.50 on the BSE and Rs 89.87 on the NSE. The delivery volume was 63.46 lac shares which means 90.66% of the shares was delivered on day one. Looking at the price pattern of the day’s trade it is apparent that those investors who have sold their allotted shares prior to 11 am have made some money or recovered their investment. People who have sold their shares later than that have lost some money. The close on the exchange was Rs 60.20 on the BSE, a loss of Rs 39.80 or 39.80%, while on the NSE the closing was Rs 61.50, a loss of Rs 38.50 or 38.5%.

The issue as was mentioned in the issue analysis article was“Does not assure capital safety – Valuations offer no scope for appreciation”. This has been proved correct.

In conclusion, yet another IPO which has played with the sentiments of the investors, used “friendly” intermediaries to prop up subscription, and as expected failed to deliver as fundamentals don’t exist.

I believe the regulator must look into the type of issues hitting the market and insist on the track record of the merchant bakers being mentioned as already proposed and implement the same immediately. The previous issue from this merchant banker was ShilpiTechnocables which after issuing shares in a price band of Rs 65-69 in April 2011 is now trading at a dismal Rs 12.16.

In conclusion yet another IPO, yet another disaster and yet another example where the promoter-merchant banker nexus has made money at the cost of investors and more importantly hammered yet another nail in the coffin of the primary market.