IPOs feel market meltdown heat on bearish sentiment

MUMBAI: Initial public offerings that opened for subscription post January 18 have been severely impacted by the bearish sentiment. Issuances like J Kumar Infraprojects, Cords Cable Industries, KNR Construction, OnMobile Global and Bang Overseas have been hurt by comparatively low institutional subscription and retail participation. Of these, OnMobile Global and Cords Cable have received comparatively good response.

“IPOs typically attract muted response in turbulent times. They garner good response during a buoyant and stable market,” said Prithvi Haldea, CMD of Prime Database. The offering by OnMobile Global (a telecom value-added services provider) which will close on January 29 has been oversubscribed 2.58 times.

The issue has a price band of Rs 425-450. While the QIB portion has been subscribed 4.6 times, the HNI and retail segments have been subscribed just 0.01 times and 0.07 times respectively, according to NSE figures as on Monday, 5 pm.

Leading cable maker Cords Cable which was open for subscription between January 21 and 24 saw its QIB portion subscribed 6.8 times, non-institutional category 5.1 times and retail 2.6 times, as per NSE data. The issue had a price band of Rs 125-135. The issue of J Kumar Infraprojects — a civil engineering and infrastructure development company — that was open for subscription between January 18-24 saw its QIB portion subscribed 2.8 times, non-institutional category 1.4 times and retail 1.7 times. The price band was Rs. 110-120. KNR Construction which opened for subscription on January 24 and would close on January 29, saw its QIB portion subscribed by 0.4 times, HNI 0.5 times and retail 0.03 times as on Monday, 5 pm. The price band is fixed at Rs 170-180. The grey market premium for these issues are Rs 100-105 for OnMobile, Rs 20-21 for Cords Cable, Rs 15-16 for KNR and Rs 5-7 for J Kumar. “The amount of subscription is a function of market sentiment. However, the subscription is not a view on the fundamentals alone... There are issues which have been graded 1 or 2 but have been oversubscribed in a bull market,” said Arun Panicker, senior director of Crisil, which had graded the OnMobile IPO 4/5. Industry sources said some of the issuers who are yet to announce the price band may have to do some rethinking. “We are unlikely to see any large issue hit the market before the budget. In fact there are talks that some of the forthcoming issues may also see their price band revised, in line with current market sentiment,” said a source. Some of the forthcoming issues are Emaar MGF, Wockhardt Hospitals, IRB Infrastructure, Shriram EPC, UTI Asset Management, JSW Energy and Mahindra Holidays. The investment banking community, however, seems to be unruffled by the market turmoil. “We are seeing long only investors subscribing to the issue. The short term investor is staying away. Of course, retail sentiment has taken a hit given that they are waiting to see at what level the markets stabilise. Unless it is a quality company with a more than decent following, the attitude will be one of wait-and-watch,” said an investment banker.