The drama and melodrama at Infosys just doesn’t want to end. Very clearly the founder and first CEO of the company NRN is hell bent on self-destruction. Ever since the first non-promoter CEO was appointed in Vishal Sikka there has been back seat driving from the founder promoter. Every issue has been highlighted using the media and creating a demoralising effect on the team. Since the last few years the board is a professional one and has no representation of the founders. This has made matters worse and damaging to the interest of the company and therefore its shareholders. Naturally as a result of the same what was once considered the darling of the markets is no longer so. The share trades at a substantial discount to the valuation of TCS while at one time it set the benchmark for valuations.

Coming to the drama and melodrama part of the episode. Thursday the share price of Infosys rose from Rs 977 to Rs 1021 a gain of Rs 44 on the back of the board deciding to meet to announce a buyback of shares. The next day the resignation announcement of Sikka saw the share plummet and close at Rs 923, a loss of Rs 98 for the day and a net loss of Rs 65 or 6.58% for the week. Finally the announcement of the buyback would be at a huge premium to the market price of Rs 923 at Rs 1,150 a premium of Rs 227 or or just under 25%. It would cost the company Rs 13,000 crs and deplete the cash in the books of the company by that amount. Infosys generates close to Rs 10,000 crs every year. Logically the buyback price could trigger a short term knee jerk price rise when markets open on Monday but nothing in the longer term as just about 5% shares would be accepted. The key would be to look at the futures volume and increase in open interest.

Coming to the markets, it was an eventful week with four trading days. The market did show some recovery after the sharp fall in the previous week but it did not have the strength or the confidence of being a change in sentiment. Global tension continues to haunt the market place and some acts of terrorism had their effect on markets as well. The BSESENSEX gained 311.09 points or 1.00% to close at 31,524.68 points while NIFTY gained 126.60 points or 1.30% to close at 9,837.40 points.

There is an IPO which opens on Tuesday the 22nd of August and closes on Thursday the 24th august from Apex Frozen Foods Limited. The company is in the business of being an integrated producer and exporter of shelf stable quality aquaculture products. The issue price band is Rs 171-175. The PE ratio for the issue considering an EPS of Rs 10.17 is between 14.21 to 14.40 times. The company would through a fresh issue and an offer for sale raise Rs 152 crs. The issue looks interesting from the viewpoint that it is attractively priced and offers scope for appreciation.

Markets are looking tired and need to consolidate before moving forward. Trade cautiously.

Shares of Cochin Shipyard Limited listed on the bourses on Friday and the discovered price was marginally higher than the issue price at Rs 435 on the BSE and Rs 440.15 on the NSE. The company had issued shares at Rs 432 and there was a discount of Rs 21 for employees and retail shareholders. The shares then rose to hit the upper circuit of 20% at Rs 522 and Rs 528.15 respectively at around noon and remained there till the rest of the day. For the records it would be that the shares gained 20.83% and 22.26% respectively.

The share issue of Cochin Shipyard created history of sorts garnering subscription of 1.11 lac crs. The issue was subscribed 75.83 times overall. The QIB portion was subscribed 63.51 times, HNI portion 287.11 times, Retail 8.23 times and Employee 0.52 times. The number of applications received was a new record of 20.75 lac applications bettering the record of HUDCO. On basis of number of applications the retail portion was subscribed 5.36 times. The amount garnered was lower than that of Coal India but one must remember that the size of Coal India was 10 times the size of Cochin Shipyard Limited at 15,500 crs while cochin was a mere 1,468 crs.
Considering the size this issue certainly received larger interest. As in keeping with the current government norms there was no anchor allocation.

The HNI at current prices has not been able to recover his cost of funding the issue and would probably have to wait a little longer before he is able to do so.

Coming to the trading data the total volume on the two exchanges was 308.62 lakh shares which was 91% of the IPO size of 339.84 lakh shares. The delivery volume was 155.12 lakh shares which was 50.26% of the traded volume and 45.65% of the issue size. With there being no anchor portion and even assuming theoretically that all retail subscribers have sold on day one, it is apparent that some HNI’s have booked losses and also sold. Today’s delivery volume would indicate the position further. The weighted average of the day’s trade is Rs 501.26 on the BSE and Rs 508.25 on the NSE indicating that the bulk of the trade happened at the higher prices. It was only the pre-open or the price discovery which saw trade of roughly 25 lakh shares on the two exchanges which were at the low of the day.

The listing on the previous day of SIS was completely the opposite where the share opened at the high of the day and slowly slid as the day progressed to close around the low of the day with losses of 7% plus. If one were to compare the two issues listing day performance they were exactly the opposite and it happened on consecutive days.

Retail investors have made decent money even if they have sold at the average price because this would further include the discount of Rs 21 which would amount to another 4%. A good issue with a decent end of day performance but very clearly the opening price was below expectations and the same could be blamed on market conditions. Once again the government has got it right and investors have made money in the IPO of yet another PSU.