Share closes with gains of 66%

Prakash Constrowell Limited listed on the BSE and NSE yesterday. The company had issues shares in a price band of Rs 132-138 and raised Rs 60 crs. The issue was subscribed 2.21 times mainly by retail investors and partly by HNI’s. The share listed at the BSE at Rs 145 and at Rs 147.20 on the NSE. The high of the day was a staggering Rs 245 on the BSE and NSE, while the low was Rs 112.50 on the BSE and Rs 112.25 on the NSE. The closing price was Rs 229.50 on the BSE and Rs 230 on the NSE.

The company issued 43,47,826 shares at Rs 138 and the traded volume was 5,57,93,235 shares or 12.83 times the IPO size. The delivery volume on the two exchanges combined was 32,52,866 shares which was a mere 5.83% of the traded volume but a significant 74.82% of the IPO size. Readers would recall that there was a lot of trading in the grey market of this company and applications of Rs 2 lacs were being purchased at a premium of Rs 2200-2400.

From the price chart attached above one scan see that after the open, the share rose for the first hour or so and touched a level of roughly Rs 165. There was a sharp selloff thereafter and the share fell all the way to the low of Rs 112 accompanied with huge volume. All this happened in a span of less than 10 minutes. The share rose slowly but steadily and made a new high of roughly Rs 175 by 1 pm. There was a small correction thereafter and after 2.45 pm the stock went ballistic. It rose almost perpendicularly and in a span of roughly 20 minutes the stock was up almost Rs 100 accompanied with huge volumes and led by interested buying and short covering. Thereafter there was in the last five minutes unloading by the “friendly” intermediary from a level of about Rs 240 to Rs 210 with huge volumes. The share closed at the weighted average close of Rs 229.50 on the BSE, a gain of Rs 91.50 or 66.30%. On the NSE the close was at Rs 230, a gain of Rs 92 or 66.67%.

The weighted average of the day’s trade was significantly lower at Rs 163.57 on the BSE and at Rs 165.32 on the NSE indicating that the bulk of the trade happened at significantly lower levels. It was the poor fundamentals and the fact that the issue did not warrant such valuations which prompted people to short sell the share and then they got trapped. As far as PrakashConstrowell is concerned their listing has been a success and it would be important to see how long the share remains at these artificial levels.

SEBI needs to look at the broader picture of how issues with poor fundamentals have such a fantastic listing before disappearing after luring investors into the trap and trading at less than even one fourth of the highs made on listing day. The fact that ONGC had to postpone the issue due to bad market conditions and these more than half a dozen issues couldn’t care less sure makes one worrisome. One only hopes the regulator does address the issue in the interest of the capital markets.