| Name | Date of listing | Issue Price | closing price | closing price | gain loss | change over |
| 21st Aug | 14th Aug | over week | lssue price | |||
| Raj Oil Mills Ltd | 12th August | 120 | 89.80 | 107.40 | -16.39 | -25.17 |
| Excel Infoways Limited | 3rd August | 85 | 91.55 | 103.20 | -11.29 | 7.71 |
| Adani Power Ltd | 20th August | 100 | 103.20 | NIL | 3.20 | 3.20 |
Is applying by leveraging worth it?
In the current IPO season the first issue to receive overwhelming support was NHPC. The issue was oversubscribed an overall 23.74 times. The individual break up was as follows
| QIB | 29.11 |
| HNI | 56.56 |
| Retail | 3.87 |
| Employee | 0.57 |
Overall 23.74 times total applications received 12, 84,390.
For purposes of this calculation certain assumptions have been used. Rate of interest is taken as 10%, period of loan as 13 days and margin is assumed as 5% which looking at the response was reduced to 3% subsequently. The HNI category was for 16, 35, 43,966 shares. At the price which has been fixed for the issue at Rs 36, the total amount to be raised in the HNI category was Rs 588.76 crs. The amount actually raised with the issue being oversubscribed 56.56 times was Rs 33,300 crs.
Taking our assumptions it means HNI’s as a group paid 5% margin of Rs 1665 crs and borrowed Rs 31,635 crs to invest in the issue. They paid a sum of Rs 112.67 crs as interest to acquire shares with a market value of Rs 588.76 crs or Rs 6.89 per share.
A retail applicant applying for maximum shares would invest Rs 94500 for an application of Rs 2625 shares and would be allotted 678 shares as per the figures based on subscription. Assuming this quantity of allotment, a HNI would have to make an application for 38347 shares investing Rs 13, 80,492. The allotment to both would be a similar 678 shares. The margin payable on this amount would be Rs 69,025 and the loan amount would be Rs13, 11,467. The total interest that would be paid by the applicant is Rs 4671 or Rs 6.89 per share. The leveraging done by the HNI investor is 19 times.
In March 2008 we all will remember that one of the reasons why markets fell was because of the leveraging position in the F&O segment. The average margins in NIFTY is about 20% which means a leveraging of about 5 times and in stock futures was around 33% which means leveraging of 3 times. If 3 and 5 times could become dangerous at that time what would 20 times do to the market. I am not considering the fact that margins were than reduced to 3 % which meant a leveraging of almost 33 times.
What this kind of leveraging does is that a) it increases the cost to the investor and b) creates additional selling pressure on the stock when it lists. In the case of NHPC with an interest cost of about Rs 7, the benchmark for the share listing becoming successful or not is not the issue price of Rs 36, but the HNI investor cost of Rs 43. Before the issue opened for subscription one heard of a premium of Rs 12-14, which reduced to Rs 10, then to Rs 7 and currently indications are of between Rs 4-5. What listing day has in store one is not sure? Probable listing date is 31st August or 1st September.
Adani Power shares listed today on the BSE and NSE. The listing ceremony was very well attended with eleven merchant bankers and was held at the convention centre of the BSE. The shares listed at Rs 105 on the BSE and Rs 108 on the NSE.
| Exchange | Open | High | Low | Close | Net Change | Volume | Delivery | Del % age | Wt Avg |
| BSE | 105.00 | 107.90 | 98.50 | 100.05 | 0.05 | 96423860 | 26057300 | 27.02 | 101.27 |
| NSE | 108.00 | 110.00 | 98.30 | 100.10 | 0.10 | 164328256 | 60240064 | 36.66 | 101.20 |
| Total | 260752116 | 86297364 | 33.10 | ||||||
The total traded volume in Adani Power on both the exchanges combined was 26.07 cr shares. The issue was for 30.165 cr shares of which 5.28 cr shares were reserved and allotted to anchor investors who have a lock in. If we were to consider the net offer the same was 24.885 cr shares. Simply putting it means that 1.047 times the shares on offer were traded on the first day. The shares marked for delivery were 26057300 (2.605cr) and 60240064 shares (6.024 cr) on the BSE and NSE respectively making a total of 8.63 cr shares or 33.1% of the total shares which were offered in the IPO.
This very high delivery indicates people wanting to exit on day one as they have not made money and therefore don’t want to continue holding the stock any further. Another way of looking at it is, that somebody or a group of people have bought shares because they believe it is at par and the waiting period and uncertainty of 20 days between the issue closing and listing does not exist. The pressure on the stock in the last hour was clearly visible and it appeared as if quarters close to management circles were supporting the counter and were determined to close the counter at atleast at the issue price. The stock finally closed at 5 paisa and 10 paisa higher on the BSE and NSE respectively.
Looking at the markets where the BSESENSEX opened at 14930, a gain of 121 points and the close at 15012.32 a gain of 202 points, it was certainly a good day at the markets. The NSENIFTY gained 59 points and closed at 4453. The poor listing even on a day when the rest of the markets performed extremely well indicates, that investors are not happy with the listing. NHPC premium was down by a rupee and rough quotes of about Rs 5.50 are being indicated but the volume is thin and people are not to keen on taking any fresh positions in lieu of the lacklustre performance of Adani Power.
The stock will be very closely watched tomorrow to see if there is any recovery or not and next week to see how the stock fares when world markets lead India down.
