ARSS Infrastructure Listing Day One

Great Listing – Excellent finish

ARSS Infrastructure Limited had a great listing yesterday and an even better finish. The company had come out with an IPO to raise Rs 103 crs in a price band of Rs 410-450 and garnered support for Rs 4900 crs. The issue was priced at Rs 450 and the issue size in number of shares was 22.89 lakh shares.

The company has created recent history with having a lottery allotment to retail category as the retail portion was subscribed over 18 times.

Coming to the actual listing itself, the share listed at Rs 640 on the BSE and Rs 630 on the NSE. The opening prices were the lows of the day as well. The highs made were Rs 754.70 on the BSE and Rs 751.80 on the NSE respectively. The traded volume was 272.73 lacs or 11.91 times the IPO size. Delivery as a percentage of traded volume was 6.53%, but as a percentage of issued capital was a substantial 77.8%.

Exchange Open High Low Close Net Change % gain Wt Avg Volume Delivery Del % age
BSE 640.00 754.70 640.00 736.30 286.30 63.62 705.82 11514084 556131 4.83
NSE 630.00 751.80 630.00 737.45 287.45 63.88 704.84 15759450 1225070 7.77
Total               27273534 1781201 6.53

The share after opening traded in the 670-685 range for a fairly long time. Sometime late afternoon in spurted to cross the 700 mark and then the 720 mark and in the last half hour or so it was frenzied short covering which saw the share cross the 750 mark and in the process give a first day return of 75% to the investor who sold at those prices. The stock closed at Rs 736.30 on the BSE and Rs 737.45 on the NSE respectively, implying a return of approximately 66% or two thirds of the issue price. The performance and returns are Excellent by all standards.

Looking at the delivery statistics it appears a large population of investors in the IPO have sold out and the last hour spurt yesterday was on account of short covering. The share is likely to consolidate at current levels before moving on. The estimated profit at the time of the IPO for the current year ending March 2010 was Rs 82 crs which now seems to be estimated at between Rs 95-100 crs. This would imply an EPS of RS 64 to Rs 67. Based on the current price of say Rs 740, the share is trading at a price earnings multiple of between 11.04 and 11.56 times, fairly attractive compared to its peers.

What is most heartening from this IPO is the experience one needs to remember about pricing. If an issue is reasonably priced, it receives attention which is disproportionate to what is expected. Here in the case of ARSS the market cap at yesterday’s closing price has risen from Rs 668 crs to Rs 1093.92 crs. This is the wealth which has accrued to all the shareholders and the greatest beneficiary is the promoter. Would a slightly higher price of say Rs 500 have brought about this transformation? I have my doubts.

Let’s hope this case is taken as an example and a test case when pricing is discussed. All in all extremely satisfying debut and one expects the company to perform to new expectations going forward.

Performance of Newly Listed Shares 26th Feb 2010

Name Date of listing Issue Price closing  price closing price gain loss  change over
26th Feb 19th Feb over week  lssue price
Infinite Computer 3rd February 165.00 196.45 196.45 0.00 19.06
Jubilant Foodworks 8th February 145.00 226.95 226.80 0.07 56.52
Vascon Engineers 15th February 165.00 121.70 132.15 -7.91 -26.24
Syncom Healthcare 15th February 75.00 94.80 80.00 18.50 26.40
Thangamayil Jewellery 19th February 75.00 65.10 71.10 -8.44 -13.20
Aqua Logistics 23rd February 220.00 232.10 NA 5.50 5.50
DB Realty 24th February 468.00 436.90 NA -6.65 -6.65
Emmbi Polyarns 24th February 45.00 27.70 NA -38.44 -38.44
Hathway Cable 25th February 240.00 201.05 NA -16.23 -16.23

Hathway Cable Listing Day one

SHARE TANKS AND CLOSES AROUND THE LOWS – DOWN 13%

One more listing and one more issue where investors have lost their shirt. Time and again, issue after issue the same thing is being repeated again and again. Issues are being aggressively priced or overpriced, then they are aggressively marketed and hype about the same is created and when the issue lists it tanks, falls or crashes. End result – Loss for investors.  Post listing the blame game begins where the sector, current market conditions are blamed for the price fall. No one is ever prepared to accept that the price charged was expensive and therefore the post listing price has taken a beating.

Coming to Hathway, the issue price band was Rs 240-265. The issue comprised of a fresh issue of 2 cr shares and an offer for sale of 77.5 lakh shares. The issue was priced at the lower price of Rs 240 and at this price the issue size would be Rs 666 crs. The fresh issue would raise Rs 480 crs for the company. The response to the issue was not over whelming and the issue was subscribed a mere 1.36 times with the retail portion being just about 25%.

The share listed on the BSE at Rs 246 which was higher than the issue price of Rs 240 and the opening price itself was the high. On the NSE similarly the stock opened at Rs 250 which was the high of the day. Thereafter it was down almost throughout the day. The low on the BSe was 206.20 while on the NSE it was Rs 204.50.

Exchange Open High Low  Close Net Change % gain Wt Avg Volume Delivery Del % age
BSE 246.00 246.00 206.20 207.80 -32.20 -13.42 217.34 6249043 321243 5.14
NSE 250.00 250.00 204.50 207.65 -32.35 -13.48 217.71 7443846 838955 11.27
Total 13692889 1160198 8.47

The trading volumes were not very high. The total volume was just about 137 lakh shares or roughly half the IPO size. The delivery volume was 11.6 lakhs or 8.47% of the traded volume. This delivery percentage or the total delivery seems insignificant to the price fall. A mere 11.6 lakh shares or a mere 4.18% of the IPO issue size of 277.5 lakh shares is insignificant for the kind of fall of 13% witnessed today. I believe if the price does not recover quickly we could see sharp erosion in price from current levels.

Very clearly amongst all the recent issues, a fall of this magnitude on such a poor delivery percentage is unheard of. It very clearly indicates that there is more pain ahead and investors should not look at investing in this company simply because it has fallen 13% or 20% from the issue price.

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