A few years ago – IPOs were very fashionable and one way to make a sure profit was to invest in IPOs and then sell them on the first day. Then the Reliance Power IPO happened, a lot of people burned their fingers and the IPO listing gains game lost all its fizz. These days it is more common for IPOs to list at a discount than at a premium.
All the bond issues that have been coming in the last one year or so have created a small listing gains market for bond issues as well and I’ve lamented this ever since I read about the gray market premium build up for the SBI bond issue. That was the issue where investors made about Rs. 320 per Rs. 10,000 and were happy to report that they had made annualized returns of 76%!
At that time I wrote that it is ridiculous to say that you made annualized returns of 76% because there is no way to execute many of these type of transactions in a year and it is inevitable that you make some losses or don’t make enough profit. It’s just a one time hit – two times if you’re lucky, but then luck will run out.
It didn’t take very long for that outcome to unfold as the IIIFL and then the Mannapuram NCD listed at a discount, and you didn’t need any kind of special foresight to see that this will happen. Now, here I don’t mean that you would be able to predict which issue will list at a discount but rather know that in a string of such issues one or two are going to list at a discount and then wipe off all your earlier gains just like the stock IPOs.
I was reminded of this yesterday when Shiv left a comment about the lacklustre performance of the IRFC bonds that listed on Friday. Here are his comments.
Shiv Kukreja March 6, 2012 at 9:36 pm 
- Manshu March 6, 2012 at 11:39 pm 
When did IRFC list and did it list at a discount? I seem to have missed this. Thanks!
- Shiv Kukreja March 7, 2012 at 9:59 am 
IRFC bonds got listed on friday, March 2nd and no they did not list at a discount but a very marginal premium of Rs. 10 odd. Closing price yday was Rs. 1005.08. Actually, after the success of NHAI bonds, many retail investors were made to invest in IRFC bonds via financing route. They were shown profits of Rs. 10000-15000 on listing. They paid Rs. 3000-5000 in financing for a Rs. 5 lakh application but the listing gains barely covered financing cost and brokerage. That is the reason many of them are not very keen on investing in REC bonds.
I think this serves as a good reminder to people who are looking to make quick bucks and feel like they can borrow money for a short while and flip an investment for a sure profit. This type of thing works only until it stops working and I believe that the only way to win these type of games is to avoid playing them.
The notification is yet to show up on the I-T Departmentâ€™s website. It is Notification No. 13, dated March 6th, 2012 and itâ€™ll appear on the below pasted link whenever I-T dept. uploads it:
Official first day figures are not out yet but the Retail response has been subdued due to a poor listing of IRFC Bonds. People who took financing for the IRFC issue have given more to their financiers and brokers than their actual profits post listing. The dreams they were shown by their brokers have not materialized and they are still selling their holdings in the secondary markets.