Markets seem to have peaked out last week after the listing of the mega issue from ICICI Prudential Life Insurance Company Limited. In the last ten years there have been three instances and if one counts the case of ICICI Pru, it would be the fourth case. In 2006 it was Reliance Petroleum, in 2008 Reliance Power and in 2010 it was Coal India. Each of these issues were very large offerings and many times the largest offering before it. For example the ICICI Pru issue was for a little over 6,000 crs and the issues before it were not greater than Rs 1,500 crs. L&T Infotech was in the region of Rs 1250 crs, while RBL Bank was a shade over Rs 1,200 crs. This means that the ICICI Pru issue was over four times bigger.
Markets began the week on a bearish note and by the end of Wednesday the BSESENSEX had already lost 376 points. What happened on Thursday actually confirmed the weakness and the week ended with losses of 802.26 points or 2.80% on the BSESENSEX. On the NIFTY the weekly loss was 220.40 points or 2.50%. We are at crucial levels of support and are at levels last seen in the first fortnight of July. The results season would begin from the following week and marketmen would be looking for green shoots and trend changers very minutely.
Last week September series futures expired and they were absolutely flat with the net change under a point at 0.95 points negative. They had begun the week with gains of 240 points which were lost in 4 days of trading which ended with the press conference about the surgical strikes across the LoC.
Last week saw two listings with the first being GNA Axles Limited. The fresh issue for 63 lac shares was in a price band of Rs 205-207 and raised Rs 130 crs. The issue was subscribed 55 times. The share is trading in trade to trade segment and would continue to do so till the end of the week beginning from today. The share had a great debut and ended the week with gains of just over 10%.
The second issue was the mega IPO from ICICI Pru. The offer for sale was a shade over Rs 6,000 crs and was oversubscribed 10.48 times. The price band was Rs 300-334 and shares were allotted at Rs 334. The share listed at Rs 329/330 and made a high of Rs 333.90 and fell thereafter. The share had a disastrous debut and closed with losses of Rs 36.35/36.45 or 10.88%/10.91%. A poor start for a fundamentally strong company even though many in the market place felt that valuations were expensive. The stock recovered some ground on Friday and closed with weekly losses of 7.16%.
This week we have the issue from Endurance Technologies Limited which opens on Wednesday and closes on Friday. The offer for sale is for Rs 1,161 crs at the top end of the price band of Rs 467-472. The company may be broadly termed as an auto ancillary having presence spread across 25 plants in India and Europe. It had revenues of Rs 5,274 crs on a consolidated basis with net margins of 5.5%. The company is into four broad segments of aluminium casting and machining, suspension, transmission and braking systems. It supplies to the 2 wheeler, 3 wheeler and 4 wheeler segments in India and 4 wheeler passenger and commercial vehicle segment in Europe. Roughly 70% of the revenues come from India and 30% from exports.
The 2 wheeler /3 wheeler segment saw about 18 million vehicles produced in the last financial year and the Asean region has 13 million which is the opportunity for the company going forward. This is besides the growth which is expected in India at around 8 to 10%. Shares of the company aree being offered at an historical valuation of 22.80 times price earnings ratio at the top end of the price band of Rs 472 based on consolidated numbers of March 2016. As this is an offer for sale there will be no dilution. The offer looks attractive considering the growth in the sector and opportunity.
The government has received excellent response to its voluntary income declaration scheme and over Rs 65,000 has been declared. 45% of this amount would flow to the coffers as tax and penalties. Bidding for spectrum has begun and after five rounds the total amount bid is about Rs 55,000 crs. Bids are a bit muted but things are likely to pick up today.
Markets have turned weak and are now in a correction mode. There will be rallies and the market would go down in a zigzag manner. Take money of the table in every rise and wait for better times to invest. The long term story is fully intact. It is only the short term and medium term where the seven month rally post budget has come to an end.

Shares of ICICI Prudential Life Insurance Company Limited (ICICI Pru) listed on the bourses and did badly. Blame it on the surgical strike, yet the performance was well below the mark and far from satisfactory.
The company had through an offer for sale sold 18.13 cr shares in a price band of Rs 300-334. The issue received excellent support and was subscribed 10.48 times. The QIB portion was subscribed 11.83 times, HNI 28.55 times, Retail 1.42 and Shareholders preferential bucket 12.20 times. This portion too was dominated by HNI’s who leveraged and applied here. Going forward in large offerings there must be a split in such bucket between HNI and retail as it is unfair to get proportional allotment when one is compared with HNI’s who are borrowing and applying. Imagine an application of Rs 200 crs compared with someone who has applied for Rs 50,000 and both get proportional. Defeats the very purpose and is most unfair.
The overall issue size was just over Rs 6,000 crs and was the largest issue since Coal India in 2010. History says that whenever there is a large issue of this kind, the listing of the issue makes a market top. Whether what we saw on Thursday was yet another instance or not only time will tell. The previous instances were Reliance Petroleum in 2006, Reliance Power in 2008 and Coal India in 2010.
The company had allotted to 38 anchor investors comprising of 69 entities a total of 4.89 cr shares. The market cap at the top end of the price band at issue price of Rs 334 was Rs 47,940 crs.
The share listed at Rs 329 on the BSE and Rs 330 on the NSE. The high was an identical Rs 333.90 on both the exchanges. This price was just below the issue price of Rs 334 and the issue price is yet to to be touched on the bourses. The share slid under pressure after the news conference of the army and made a low of Rs 295.50 and Rs 295.15 on the two exchanges. The closing price was Rs 297.65 on the BSE, a loss of Rs 36.35 or 10.88%. The closing price on NSE was Rs 297.55, a loss of Rs 36.45 or 10.91%.

The total traded volume on the exchanges was 1017.77 lakhs which was 56% of the IPO size and 77% of the non-anchor issue. Delivery volume was 403.83 lac shares which was 39.68% of the traded volume and 22.27% of the issue size. Considering non anchor the delivery volume was 30.51%. This implies that there was large liquidation at a loss from HNI’s. They had borrowed at an average of 4.5% and the cost of funding in the HNI category was Rs 8.25 and in the shareholder category was Rs 3.55. In either case they lost money.
The weighted average of the day was Rs 313.77 on the BSE and Rs 314.02 on the NSE. The closing price was a good Rs 16-17 lower or almost 5%, indicating that in the end there was panic. The company is good and the business prospects promising. Markets behave in a manner that they understand best. While the debut was poor and far from satisfactory, let us hope that things improve when the company announces its quarterly results later this month.