Issue price of Rs 150 makes a low of Rs 38.50 before closing at Rs 55.85

Taksheel Solutions Limited, a Hyderabad based company in the IT space had tapped the capital markets with its issue for 55 lac shares in a price band of Rs 130-150. The issue was subscribed 2.99 times with the help of HNI’s and retail investors. The QIB portion remained undersubscribed and received bids for a mere 24% of the QIB portion. The share listed today on the BSE and NSE and opened at Rs 157.40 on the BSE and Rs 157 on the NSE. The high was Rs 185 on the BSE and Rs 184.30 on the NSE while the low was Rs 38.50 on the BSE and Rs 39.10 on the NSE. The close was Rs 55.85 on the BSE, a loss of Rs 94.15 or 62.77%, while on the NSE it was Rs 39.10, a loss of Rs 91.85 or 58.15%. It sure was a sad day for the company and its investors and has once again proved that fundamentals and proper pricing alone can ensure the success of an issue.

The issue for 55 lac shares was graded 2/5 by CARE and indicated poor fundamentals. There is talk that the share subscription was managed by friendly intermediaries and there were application forms which were bought at Rs 2000-2100 for Rs 2 lac retail application. The trading volume was very high and the volatility in the scrip simply unimaginable. The total traded volume was 913.01 lac shares which was 16.6 times the IPO size of 55 lac shares. The delivery volume was 52.04 lac shares which was 5.70% of the traded volume but a very significant 94.62% of the IPO size. This supports the argument that the fundamentals are weak and that help from friendly intermediaries was taken to ensure subscription.

The stock opened at Rs 157.40 on the BSE and at Rs 157 on the NSE and was under pressure right away. Over the next two hours the stock was under constant pressure and continued to lose ground. It had made a low of Rs 112.70 and then in the next half hour from 11.30 pm to 12 noon, the stock rose virtually in a 90 degree angle to touch the high of the day 185 on BSE and Rs 184.30 on the NSE. The volume in this period was indeed huge and on the NSE alone clocked 70.14 lacs. IF one were to divide the total turnover into half hour slots the average would have been 41.26 lac shares on the NSE against which the same was 70.14 lac shares. A rise from Rs 112 to Rs 184 just doesn’t happen, it is made to happen and all those who were short on the counter, surrendered. In the next half hour the price had again fallen and come down to Rs 121. Next ninety minutes was the distribution phase where the price drifted, nothing significant happened and the price slowly but steadily came down to below the 110 levels. Between 2 and 2.30 pm there was another dip and then in the last hour all hell was let loose with the stock making an intra-day low of Rs 38.50 on the BSE and Rs 39.10 on the NSE. The weighted average of the day’s trade was Rs 114.60 on the BSE and Rs 114.76 on the NSE which is a significant variation from the closing price. This indicates that most investors have lost money and anybody who has sold after 12.30 pm has lost anything between 30% to 70% of his investment.

The company at the issue price had a market capitalisation of Rs 327.78 crs on a fully diluted post issue basis which at the end of the carnage on the first day was reduced to a mere Rs 122.37 crs, a loss of 205.41 crs, on a day when the markets were on a roll and the BSESENSEX clocked gains of 337 points or 2.08%.

The exchanges give you an analysis of trading on a half hourly basis and I have appended above the same for the company from the NSE. It is apparent that the entire action has been done in the half hour starting 11.30 am and ending 12 noon. The vertical rise and then the fall is apparent even for a lay man. If the regulator decides to take action it is crystal clear to pinpoint the people behind the movement and how wealth has been destroyed. In a mere 30 minutes the stock rose a spectacular Rs 62 on huge volumes only to fall in the next thirty minutes.

It would be fair to say that this was yet another example of an issue which came to the markets with poor fundamentals, garnered support on the basis of friendly intermediaries and faltered on day one itself losing a bombshell for investors. One hopes that with each such example, investors and regulators take note of what’s happening and avoid such issues in future. One also requests that the regulator should make at least one issue an example so that others take it as a strong deterrent going forward.

For the record books on more September issue and one more disaster.

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• Taksheel Solutions IPO: Issue Subscribed