ICICI Bank Limited is entering Indian primary market with a Public issue of * equity shares. Below are the salient features of this issue:
Business of the Company
ICICI Bank Limited is a household name in India. Incorporated in 1994, it is currently the largest private sector bank and the second largest bank in India in terms of assets. Company is a leading name in both corporate and retail banking. It has a total of 710 branches, 45 extension counters and 3,271 ATMs. The bank has approximately 24.0 million retail customer accounts. Their corporate customers include India’s leading companies as well as growth-oriented small and middle market businesses.
Promoters
The company has no identifiable promoters. Nearly 25% of total capital is in form of ADS. There are a total of 113.73 million outstanding ADSs. Life Insurance Corporation of India has nearly 7.8 percent of equity. Surprisingly, Bajaj Auto Ltd. has nearly 4% of equity shares of the bank. The bank is however professionally managed.
Financials
ICICI Bank Ltd. is a consistent profit making company. For the FY ended March 31, 2007, the company clocked a total interest income of Rs. 230 billion rupees. The net interest income for the same period was about Rs. 66.36 billion and total income was about Rs.125.65 billion. The PAT for the year was Rs.31.10 billion. For FY 2006, company had clocked a turnover of Rs.88.90 billion and a net profit of Rs.25.4 billion. For both the above periods, corresponding diluted EPS was Rs.34.64 and Rs. 32.49 respectively.
Particulars of the Issue
The issue is for * equity shares of Rs.10 each for cash at a price of Rs.* per share aggregating to Rs.* crores. The issue will constitute about * of fully diluted post paid up equity capital.
Basis for Issue price
ICICI Bank Ltd. is India’s largest private sector bank, and the second largest bank in India in terms of total assets. At May 10, 2007 the bank had the largest market capitalization among all banks in India. Its subsidiaries in life and non-life insurance have achieved leadership positions among private sector life and non-life insurance companies. Its Net NPA Ratio was 0.98% at March 31, 2007. Its advances increased 34% to Rs. 1,958.66 billion at March 31, 2007
Objects of the Issue
Main object of this issue by the bank is to augment its capital base to meet future capital adequacy requirements arising out of growth in its businesses and for other general corporate purposes. Other general corporate purposes will include development of channel infrastructure to support business growth and service customers in a better way.
Risks
Following are the key risks which can impact company’s performance:
a. Volatility in interest rates could adversely affect net interest margin, the value of fixed income portfolio, income from treasury operations, the quality of loan portfolio and financial performance.
b. Like for any other bank, level of non-performing assets remains as a major risk.
c. Decrease in value of collateral is a potential risk for the bank.
d. Reorganization of holdings in insurance and asset management subsidiaries remains a challenge for the bank.
e. Foreign exchange rates fluctuations can affect the company.
f. Government policies also have major impact on the company’s business.
* indicate that information is yet to be declared by the company.
Spice Communications Ltd.
Spice Communication Limited is entering Indian primary market with a Public issue of 137,985,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Spice Communications Ltd. is in the business of providing mobile telephony services. It started its operations in 1997. It is the second largest cellular service provider in Punjab and the sixth largest in Karnataka. Company till the date of 31st March, 2006 has a subscriber base of about 2.45 million in these states. Out of this, about 1.92 million were pre paid and about 0.53 million were post paid customers.
Promoters
The company is promoted by the Mr. Dilip Modi. He is also promoter of other companies in the Modi family.
Financials
Spice Communication Ltd. is a loss making company. For the FY ended June 30, 2006, the company clocked a turnover of Rs. 680 crores. The restated net loss for the same period was about Rs. 69 crores. For FY 2007, till September’2006, company had clocked a turnover of Rs.185 crores and a net loss of Rs.25 crores. For FY 2005 and FY 2004, the top line was Rs. 643 and Rs. 554 crores approximately. The net profit for FY 2005 was Rs. 7 crores and for FY 2004 net loss was Rs. 23 crores.
Particulars of the Issue
Spice Communication Ltd. IPO is a fresh 100% Book Building issue of 137,985,000 Equity Shares of Rs. 10 each. At least 135,985,000 Equity Shares of Rs. 10 each is reserved for the retail investors.
Basis for Issue price
Spice Communication Ltd. claims that it’s a strong player in its circle of operations. It claims it is the second largest operator in Punjab. Its strategic investor TM is considered as one of its strong point. It claims it has a vibrant brand name and strong management team.
Objects of the Issue
Primary objects of the issues are payment of long term debt, payment for NLD/ILD license fees and meet capital expenditure requirements. About Rs. 64 crores will be used for NLD and ILD fees and related expenses. Also another object of the issue is the obvious listing gains of its equity shares.
Risks
Following are the key risks which can impact company’s performance:
a. Certain Persons forming part of Promoter Group are involved in certain legal proceedings and regulatory matters, some of which may have a significant impact on business, financial condition and results of operations. Some of these are for defaulting on loan re-payments.
b. Company is a regional player in the cellular services industry and significant competition from larger, national cellular service providers may have a material adverse effect on our profitability.
c. Customer base is small.
d. Company has made significant losses in current financial year and also in the past.
Magnum Ventures Ltd.
Magnum Ventures Limited is entering Indian primary market with a Public issue of 1, 76, 40,750 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Magnum Ventures Limited is a company which has business interest in multiple fields. It is involved in trading and manufacturing of paper for more then 25 years. The existing manufacturing capacity includes writing and printing paper, and duplex boards with the total annual capacity at 85,000 MT. Company has 3 manufacturing units located at Sahibabad, UP.
Promoters
The company is promoted by the Jain family. The key promoters of the company are Mr. Praveen Kumar Jain, Mr. Pradeep Kumar Jain, Mr. Parmod Kumar Jain and Mr. Vinod Kumar Jain. There are more members of the Jain family in the promoter group. Rose Corner Trading Company LLC., Dubai; Delhi Paper Company (Partnership Firm) are the other group companies.
Financials
Magnum Ventures Ltd. has shown consistent profits in last 5 years. For the FY ended March 31, 2006, the company clocked a turnover of Rs. 74 crores. The restated net profit for the same period was about Rs. 8.10 crores. For FY 2007, till September’2006, company had already clocked a turnover of Rs.59 crores and a net profit of Rs.4.7 crores. For FY 2005 and FY 2004, the top line was Rs. 61.59 and Rs. 58.36 crores approximately. The net profit for FY 2005 was Rs.2.31 crores and for FY 2004 was Rs. 1.14 crores.
Particulars of the Issue
Magnum Ventures Ltd. IPO is a fresh 100% Book Building issue of 1,76,40,750 equity shares. Issued, Subscribed and Paid up Capital before the Issue is 1, 99, 60,700 Equity Shares of Rs.10/- each. Paid up Share Capital after the Issue will be 3,76,01,450 Equity shares of Rs.10/- each.
Basis for Issue price
Magnum Ventures Limited is a 26-year-old Company engaged in the Paper industry. The Company is strategically located in close proximity to the source of raw materials and main customers for supply of finished products. Company has captive power plant and a de-inking plant to manufacture better quality paper. The proposed hotel is near to Delhi. Plus, the promoters believe that they have more then 2 decades of experience.
Objects of the Issue
The primary purpose is to modernize its production facilities of its Paper Unit II and III by technological upgradation including replacement of plant and machinery with regard to manufacturing of duplex board, writing and printing paper, and allied sections such as chemicals and Fibre Recovery Section, Recycling of Backward System etc., at a project cost of Rs. 50 crores. The other main purpose is to venture into hospitality industry by setting up a 4 Star Business Hotel with 212 rooms, conference halls, food & beverages and other facilities, at a project cost of Rs. 102.63 crores.
Risks
Following are the key risks which can impact company’s performance:
a. Paper industry is a cyclical and labor intensive industry.
b. Both paper and hotel industry are highly competitive sectors.
c. Government tax benefits changes, economic growth changes, foreign exchange rates are some other external risk factors to be considered before applying for this IPO.
d. Company is fighting various tax related cases. Disputed tax amount totals up to around Rs.3.30 crores.
e. License agreement between the company and Country Inn & Suites by Carlson is non-exclusive.
Indowind Energy Ltd.
Indowind Energy Limited is entering Indian primary market with a Public issue of 1,25,00,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Indowind started developing wind farms in a small way by installing a 225 KW Wind Electric Generator, in September 1995. Since then, the Company has been expanding wind farm capacity every year to reach the present capacity of 16.825MW and 17.915 MW for clients & group companies whose O&M is with the Company. The Company is currently in the process of implementing additional capacity of 9MW capacity in Karnataka.
The current scope of operations of Company includes:
A) Wind Power Generation
B) Operations & Maintenance of WEG’s
C) Turnkey operations for windmill projects
Promoters
The company is promoted by the entrepreneur Mr. K V Bala. Subuthi Finance Limited and Loyal Credit and Investments Limited are the other promoters of the company.
Financials
Indowind Energy Ltd. has shown consistent profits in last 5 years. For the FY ended June 30, 2006, the company clocked a turnover of Rs. 26 crores. The restated net profit for the same period was about Rs. 5.20 crores. For FY 2007, till September’2006, company had clocked a turnover of Rs.4.66 crores and a net profit of Rs.2.15 crores. From past 2 years, nearly 50% of sales come from Project Income. However, for the 3 months of FY 2007, no Project Income is shown in the financial results. For FY 2005 and FY 2004, the top line was Rs. 19.83 and Rs. 8.66 crores approximately. The net profit for FY 2005 was Rs. 4.14 crores and for FY 2004 was Rs. 3.08 crores.
Particulars of the Issue
Indowind Energy Ltd. IPO is a fresh 100% Book Building issue of 1,25,00,000 Equity Shares of face value of Rs. 10/- each constituting 25.53% of the fully diluted post issue paid up capital of the Company. At least 42,84,000 Equity Shares of face value of Rs.10/- each constituting at least 35% of the Net Issue is reserved for the retail investors.
Basis for Issue price
Indowind Energy Ltd. claims that it’s a consistently profit making company. It generates power without using any raw materials. Company has become the first Wind Energy company from India to get the Carbon Credits (Certified Emission Reductions) issued by UNFCCC for its recently commissioned 12.3 MW projects in Tamilnadu under the Clean Development Mechanism of Kyoto Protocol.
Objects of the Issue
The Setting up 9 MW Wind Farm Project in at Chitradurga, Karnataka is one of the main objects of issue. Then purchase of Hydraulic cranes and acquisition of second hand Wind Energy Generators (WEG) from Banks are other key objects. Company intends to foreclose lease with ICICI Bank and UTI Bank with issue proceeds.
Risks
Following are the key risks which can impact company’s performance:
a. Project has not been appraised by any financial institution.
b. There is risk related to purchase of second hand windmill machinery and no definitive agreement to do so have been entered so far by the company.
c. Company has not yet signed a Power Purchase Agreement with Karnataka State government.
d. Company is fighting various tax related cases.
e. Company enjoys various government incentives like Section 80-IA. If this is withdrawn, it can adversely impact the company performance.
Of Exchange Rates, Interest Rates and Inflation
The rupee has breached 41 against the dollar after many years now and the RBI is not doing what it is best at, which is going in the market and buying dollars to maintain a comfortable exchange rate.
What is stopping the central bank from doing this, is the inflation rate. Which is already quite perturbing for all politicians, some economists and quite certainly RBI.
The rupee to dollar rate is decided by the relative demand and supply between the two, so historically whenever the RBI wanted to push the price of the dollar higher, it used to go out in the market and buy dollars using rupees. This ensured that the relative demand of dollar became higher vis-a-vis the rupee.
What this would also imply is that the supply of rupees in the economy became greater. And greater money supply causes higher inflation in the economy. Simply put, if earlier there were a thousand rupees in the economy, and now the supply is equal to a couple of thousand rupees the value of a single rupee halves (ceteris paribus of course). In case you are wondering how the thousand became two thousand, unlike you and me, RBI can pretty much print money and circulate in the economy jacking up the monetary base of the economy or what is called in Economics text books as – too much money chasing too few goods.
The other major head-ache that RBI has is to control what is now started being referred as over-heating of the Indian economy. The most potent weapon for controlling the over-heating was to increase the interest rates and making borrowing costly and slowing down the investment and consumption in the economy.
However the central bank has avoided this measure as well because higher interest rates offered by domestic banks are enticing NRIs and other institutions to deposit the dollar holdings that they have in India. What that means is that there would be more dollars in the Indian economy weakening the dollar further and then the RBI would have to print more rupees to buy more dollars and in the process push the inflation higher as well.
It is a tricky situation that is being faced by RBI and one that is being dealt with using a different nature of solution this time around that of allowing more dollar investments by Indian companies and Indian individuals and other factors which look at pushing out dollars from the economy. However by its very nature this measure is more longer term than the previous short term measures and hence the current exchange rate.
Whether the new exchange rate is a temporary phenomenon or Indian exporters will have to adjust to lower realizations is anybodys guess. For now it seems that most of the Indian companies focusing on export revenues will bear this brunt in fiscal 2007Â – 08.
Manshu Verma
Zylog Systems Limited
Zylog Systems Limited is entering Indian primary market with a Public issue of 3,600,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
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Zylog Systems Limited is a Chennai based IT services and products Company. Established in 1995 and business commencement in 1997, is a 100% EOU registered with STPI (Software Technology Parks of India). By its onsite offshore model, it provides IT services to its clients as per their requirements. Telecom, Banking Financial Service and Retail companies are prime contributors to its top line.? It has products like Z*Connect, Z*Prism, insured Vehicle Accident Recovery Systems (iVARs), Claim Management System, RTGS PayManager, VISTEM and WAP Page.
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Promoters
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The company is promoted by Mr. Sudarshan Venkartaman and Mr. Ramanujam Sesharathnam.
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Financials
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Zylog Systems Ltd. is a consistent profit making company. For the FY ended March 31, 2006, the company clocked a turnover of Rs. 261.20 crores. The restated net profit for the same period was about Rs. 41 crores. For FY 2007, till Oct?2006, company had already clocked a turnover of Rs.209 crores and a net profit of Rs.30 crores. For both the above periods, corresponding Networth was Rs.104 and Rs. 135 crores respectively.
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Particulars of the Issue
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Zylog Systems Ltd. IPO is a fresh issue of 3,600,000 equity shares. After keeping aside 100,000 shares for its employees, the net issue for public is 3,500,000. The net Retail portion is upto 1,050,000 equity shares. Post IPO, the total outstanding equity will rise from 12,846,420 to 16,446,420 equity shares.
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Basis for Issue price
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Zylog Systems Ltd. claims that it has established a Global Delivery Model with office in USA, UK and Singapore. This set up has helped them do low cost delivery to clients. Further, it claims that is has ability to scale rapidly. It further banks on its quality delivery and long term client relationship to give it continuous business. For Fiscal 2006, it had an EPS (Earning per Share) of Rs.37.24. For the Seven months of FY 2007, the same stood at Rs.28.58.
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Objects of the Issue
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The primary purpose is expansion of current operations. Out of the total proceeds of the issue, about Rs.67 crores will be utilized for setting up 2 Offshore Delivery centers. A whopping Rs.81 crores will be kept aside for Working Capital requirements. The rest will be used for acquisitions and issue expenses.
Risks
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Following are the key risks which can impact company?s performance:
a. Zylog Systems Ltd. has 3 Direct Taxes and 2 Indirect Taxes litigations pending against it. The combined claim is about 4.40 crores.
b. Except for working capital requirements, rests of objects of issue have not been appraised by any independent appraiser.
c. Failure to get contracts can result in a huge bench of workforce which would translate in significant spending without any significant return.
d. Heavy dependency on US clients is a typical risk factor found in Indian IT companies.
e. Dollar weakness can impact company.
f. Chinese IT industry is a big potential threat.
The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.
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Mundra Port and Special Economic Zone Limited
Mundra Port and Special Economic Zone Limited is entering Indian primary market with a Public issue of 40,250,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Mundra Port and Special Economic Zone Limited is the developer and operator of Mundra Port, located in Kutch district of Gujarat. Company has exclusive rights to develop and operate the same for 30 years. Company has also received rights to develop a multi-product SEZ at Mundra and its surrounding areas. The port is primarily engaged in providing bulk cargo services, container cargo, crude oil cargo and value-added port services, including railway services. Partial commercial operations commenced in Oct, 2001.
Promoters
The company is promoted by the famous Adani group. The group is engaged in commodities trading, power trading & generation, coal mining, real estate development, agro processing & logistics and shipping.
Financials
For the FY ended March 31, 2006, the company clocked a turnover of Rs. 397 crores. The restated net profit for the same period was about Rs. 75 crores. For FY 2007, till September’2006, company had already clocked a turnover of Rs.246 crores and a net profit of Rs.126 crores. For the six months ended 30th Sept, 2006, Company’s P/L statement, as in the Red Herring prospectus, shows Tax credit of Rs.38 crores. For FY 2005 and FY 2004, the top line was Rs.277 and Rs.173 crores approximately. The net profit for FY 2005 was Rs.70 crores. In FY 2004, company had a net loss of about Rs.10 crores.
Particulars of the Issue
Mundra Port and Special Economic Zone Ltd. IPO is a fresh 100% Book Building issue of 40,250,000 equity shares. After keeping aside 150,000 shares for its employees, the net issue for public is 40,100,000. The net Retail portion is a minimum of 30% of total equity shares. For retailers, full bid amount needs to be paid while bidding.
Basis for Issue price
Mundra Port and Special Economic Zone Ltd. claims that its strategic location serving the landlocked Northern India and North Western India will give it huge amount of business. Land with port back-up area and infrastructure will help future expansion and SEZ advantages are other basis for issue price. The adjusted EPS for FY 2006 stands at Rs.1.98. There are no listed companies in India which can be compared with Mundra Port and SEZ.
Objects of the Issue
The primary purpose is construction and development of basic infrastructure and allied facilities in the proposed Mundra SEZ. Construction of a south basin terminal for coal and other cargo at Mundra Port is the other objective of issue. Company also intends to fund group companies like Adani Petronet (Dahej) Port Pvt. Ltd; Adani Logistics Ltd; and Inland Container Pvt. Ltd.
Risks
Following are the key risks which can impact company’s performance:
a. Government’s volatile policies on SEZs remain the biggest risk.
b. Company heavily depends on concessions and licenses from government and quasi-government organizations.
c. Company has agreement with P&O Ports (Mundra) Pvt. Ltd. for container handling services. P&O Ports got acquired by Dubai Ports World. Hence, the agreement is reviewed again by Gujarat Maritime Board.
d. Many contracts with its customers contain provisions which if exercised by the customers can adversely affect the company.
e. Company relies on small number of customers for a large proportion of its revenues.
f. Company in the past has entered into related party transactions and will continue to do so in future.
g. Severe weather conditions can adversely impact its operations.
The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.
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Rathi Bars Limited
Business of Rathi Bars Limited
Rathi Bars Limited, a member of the famous Rathi group, is presently involved in manufacturing steel bars. Steel bars are used in construction of huge structures such as Dams, Multi storied building, Bridges, Flyovers as a basic reinforcement material. There a variety of steel bars. Rathi Bars manufactures Cold Twisted Deformed (CTD) and Thermo mechanically Treated (TMT) bars. These two varieties fall in the Long products group of the steel bar industry. Ms-Ingot is the main raw material.
Promoters
The company is promoted by the Rathi family. The key promoters are Kamlesh Kumar Rathi, Anurag Rathi, Anupam Rathi and other Rathi family members.
Particulars of the Issue
The issue is for 71,42,857 equity shares of Rs.10 each for cash at a price of Rs.35 per share aggregating to Rs.25 crores. The issue will constitute about 44% of fully diluted post paid up equity capital.
Basis for Issue price
Company claims that it is a manufacturer with high demand in Northern India. Plus, it has superior technology and quality certifications. “Rathi” is a well established brand in the market. Earning Per Share (EPS) for FY 2005-06 was Rs.10.90. Eight months EPS for the current financial year is Rs.6.83. Industry average P/E multiple is 8.60. As per the company’s prospectus, Kamdhenu Ispat Limited, Rajpur Alloys Limited, Vardhaman Industries Ltd and Zenith Birla (all having P/E above 10) are its peer companies.
Objects of the Issue
Company’s products are popular in Northern states like Haryana, Rajasthan and HP. Primary motive of this issue is to fund its expansion products. Company also intends to start production and sale of steel billets. Out of the total issue proceeds, Rathi Bars Ltd. intends to spend about Rs.20 crore on plants and machinery. About Rs.11 crore will be for working capital. The issue expenses are Rs.2 crore.
Risks
Following are the key risks which can impact company’s performance:
a. There are 2 excise related and 16 sales tax (amounting to about Rs.9 crore) and one Service tax related cases pending against the company.
b. Objective of the issue has not been appraised by any independent agency.
c. Surprisingly, there are other companies in the Rathi group who are in the same line of business as Rathi Bars Ltd. Hence, there is competition within the group.
d. Certain statutory approvals are yet to be received.
e. Company has non-exclusive rights to use the brand name “Rathi”.
f. Steel industry is cyclical in nature.
g. Chinese steel industry is a big potential threat.
The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.
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The boundary less IT – Revolution
There are two defining characteristics of any economic revolution, one is that they bring unprecedented prosperity to the regions that these revolutions start off and another is that these revolutions percolate to other regions albeit gradually. As an after-thought there is a third characteristic as well, they are taught in schools long after they are over.
However it might have been an interesting thing for someone to have gone and asked people of those times whether they knew they were part of a revolution. Chances are that most of them would not have realized that they were part of any revolution at all and a still greater part of the population would not even have known what a revolution is and would have thought that the prosperity that they were enjoying was temporal in nature and the cause of it was there own diligence and intellect.
The later half of the 20th century and the 21st century would be known in the history of mankind for another kind of revolution which is the IT revolution. While people who live through this revolution would also be unaware of the cause of the prosperity that they enjoy and would also see incomes rising in a way never known before there is one factor which will make the IT Revolution different from all other revolutions of the past.
The difference is this ? This revolution would in times to come not be known as belonging to one country but rather one class of people belonging to most of the countries in the world.
By its very nature IT and the internet are making the world smaller, at a personal level they are making it far easier for people of one culture and country to connect to another and making the world boundary less in a never before known manner. At the level of businesses and corporates, IT would strengthen the invisible hand of Adam Smith to hitherto unknown strength and business would truly reach where it ought to for economic reasons as the geographical boundaries that are put up by countries would be breached not by swords or cannons but by megabytes and fiber optic.
In this revolution not only would people from all across the world be able to participate but would also contribute to it by bringing to the table skills to the disposal of enterprising individuals at never before known prices and would make doing business much easier and much more profitable than it was for any individual during the history of mankind.
How does this work? Take an example of a violin manufacturer in Australia who wants to sell his violins in Australia and other parts of the world through his ?physical? shop and also his virtual shop which is the internet. The internet provides the Aussie a means to hire a web designer in Romania to design his website and a content writer in India to write the content, using the services of a website hosted and run by a company in the United States and ultimately using his website to sell violins to people of Australia, UK and New Zealand among other countries. The most striking point about this is that all continents but Africa and Antarctica have been involved in this business cycle.? Africa I am sure will pick up in years to come but we will have to wait till the Penguins learn English for Antarctica to really join in. All this is already happening today, I know because I have been part of this chain and anyone who looks around him would find many more examples for himself.
The future would see more of this because of which small businesses would thrive and there would be truly a monopolistic market without any geographical boundaries. Competition would be intense and in this competition the fittest will survive regardless of the country of there origin.
The reason why the IT revolution promises to be ?boundary-less? is that the people from all these countries would benefit from the enterprise of there people and increasingly more and more people from different countries would be participating in a single business cycle and these business cycles would in turn promote other business cycles locally like for instance our Romanian developer spending money on Ice cream in Romania which helps everyone right from the retailer to the ice factory.
The sum would be much greater than the parts and although at the end we may see that one country has benefited from IT more than others the world in general would be a richer place.
At the end of the IT revolution or rather when the IT revolution as we see it today has peaked out one would see that a lot of countries have thriving businesses started off by first generation entrepreneurs who employ lot of smart people around the world and the number of Multinationals that we have today would have grown multifold with businesses doing business across geographies and making money across continents hiring people from all of these places. These business would spread there wealth across the world creating sprightly economic conditions in not only there own country but in a lot of other countries.
For investors such as me and probably you what is important is to recognize that there will be a lot of interesting stocks which will be ?start ups? and which will either enable these business cycles or be part of it, and on a more macro level we are in a revolution so don?t get left out by sitting on the fences.
Manshu Verma
The IPO Excesses seems to be finally over
The IPO Excesses seems to be finally over
In the recent times in the Indian stock markets there have been many IPOs that have listed much below there offer price and would have therefore meant a loss to those investors who had subscribed for the same.
Traditionally IPOs were offered by the promoters with a certain discount to the inherent value of the stock to the public so that they public at large could benefit from what is knows as “listing gains”. However the trend lately has been one where the promoters have priced their IPOs very aggressively and most of the times there had been nothing left for the investors at the time of listing.
However old habits die hard and even though investors could see for themselves that there is no money to be made in the IPOs were still queuing up for IPOs of similar nature where the pricing was aggressive, pedigree of investors not too well known and the track record of business not proven.
One can only hope that after seeing a series of IPOs fail in a short while the investors will finally come to terms with the reality that today investing in IPOs do not mean easy money as it used to in not too far a past. And increasingly promoters are pricing their stocks very aggressively and do not leave anything for the retail investors at the time of listing.
The retail investors need to be wary about which IPOs to invest in as the numbers of profitable IPOs are really dwindling and the only one in the recent past has been MindTree which has provided some listing gains to the investors.
Investors should be really wary about borrowing money to invest in IPOs because of the same reason as when one borrows to invest in the markets because of being allotted lesser number of shares than the application and the rate of interest of the borrowing it becomes more and more difficult to make any money and one bad investment nullifies all the good ones that have been done in the past because often the price falls are more spectacular than gains.
With all this in mind investors need to come to terms with the reality that IPOs today are not as profitable as some time ago and therefore one would need to exercise a lot of discretion before investing in any one and the practice of blindly borrowing money, investing and then selling on listing would not work for most of the stocks any longer.
Manshu Verma