MUMBAI: As the going gets tough on Dalal Street, merchant bankers are pulling out all stops to ensure smooth sailing of public issues. Some are now seeking informal commitments from high net worth and institutional investors to ensure their participation.
Considering the risks involved in aggressive pricing of IPOs in uncertain markets, most of them are negotiating the issue price and are opting for reasonable pricing.
Merchant banking sources said the change in approach is a fallout of a spate of failures in the IPO market. As market turned volatile, several companies were forced to withdraw or defer their IPOs. Earlier this year, two issues from construction major Emaar MGF and Wockhardt Hospital were withdrawn for lack of investor interest.
“Merchant bankers would like to achieve some comfort before launching issues in a bad market. So, they try to get commitments from large investors about their participation. This is done, especially, when companies are desperate to raise money and cannot defer their offers,” said Prime Database managing director Prithvi Haldea.
Pricing is a key issue in such negotiations. High net worth investors or qualified institutional buyers may not honour their commitments if the price is not tempting enough, said Mr Haldea.
Four companies, Sejal Architectural Glass, First Winner Industries, Archidply Industries and Lotus Eye Care, are entering the capital market next week, with plans to raise between Rs 38 crore and Rs 97 crore at the lower limit of the price band.
The fate of these offers will also depend on the secondary market conditions. Currently, the market is going through a tough time, reeling under inflationary pressures and oil concerns. From the beginning of the year, the BSE Sensex has lost more than 4800 points. The Sensex, which touched a high of 20395.4.89 on January 1, 2008, closed at 15572.18 on Friday.
Some merchant bankers feel investors may like to subscribe to these issues, especially if the pricing is reasonable and fundamentals are sound. “Even in a bad market, new issues have been doing well because of reasonable pricing. A few recent ones have, in fact, offered decent returns to investors on listing,” said Sharad Rathi, head of investment banking at Almondz Global Securities.
Some of the market debutantes are in fact doing well on the bourses. Anu’s Laboratories and Gokul Refoils, two latest entrants, closed at Rs 265 and Rs 205, respectively on Friday, against their offer prices of Rs 210 and Rs 195. Anu’s Laboratories’ Rs 76-crore issue was oversubscribed by 8.4 times while Gokul Refoils garnered demand of 4.3 times its issue size.
Apart from the failures of Emaar and Wockhardt Hospitals, Reliance Power’s poor listing on the bourses also came as a major blow to the primary market.
While a few small-sized issues have managed to sail through in the current market, what is badly needed to boost the investor confidence is a sustained improvement in overall market conditions and successful re-entry of large-sized IPOs, says an investment banker with a foreign brokerage.
Considering the risks involved in aggressive pricing of IPOs in uncertain markets, most of them are negotiating the issue price and are opting for reasonable pricing.
Merchant banking sources said the change in approach is a fallout of a spate of failures in the IPO market. As market turned volatile, several companies were forced to withdraw or defer their IPOs. Earlier this year, two issues from construction major Emaar MGF and Wockhardt Hospital were withdrawn for lack of investor interest.
“Merchant bankers would like to achieve some comfort before launching issues in a bad market. So, they try to get commitments from large investors about their participation. This is done, especially, when companies are desperate to raise money and cannot defer their offers,” said Prime Database managing director Prithvi Haldea.
Pricing is a key issue in such negotiations. High net worth investors or qualified institutional buyers may not honour their commitments if the price is not tempting enough, said Mr Haldea.
Four companies, Sejal Architectural Glass, First Winner Industries, Archidply Industries and Lotus Eye Care, are entering the capital market next week, with plans to raise between Rs 38 crore and Rs 97 crore at the lower limit of the price band.
The fate of these offers will also depend on the secondary market conditions. Currently, the market is going through a tough time, reeling under inflationary pressures and oil concerns. From the beginning of the year, the BSE Sensex has lost more than 4800 points. The Sensex, which touched a high of 20395.4.89 on January 1, 2008, closed at 15572.18 on Friday.
Some merchant bankers feel investors may like to subscribe to these issues, especially if the pricing is reasonable and fundamentals are sound. “Even in a bad market, new issues have been doing well because of reasonable pricing. A few recent ones have, in fact, offered decent returns to investors on listing,” said Sharad Rathi, head of investment banking at Almondz Global Securities.
Some of the market debutantes are in fact doing well on the bourses. Anu’s Laboratories and Gokul Refoils, two latest entrants, closed at Rs 265 and Rs 205, respectively on Friday, against their offer prices of Rs 210 and Rs 195. Anu’s Laboratories’ Rs 76-crore issue was oversubscribed by 8.4 times while Gokul Refoils garnered demand of 4.3 times its issue size.
Apart from the failures of Emaar and Wockhardt Hospitals, Reliance Power’s poor listing on the bourses also came as a major blow to the primary market.
While a few small-sized issues have managed to sail through in the current market, what is badly needed to boost the investor confidence is a sustained improvement in overall market conditions and successful re-entry of large-sized IPOs, says an investment banker with a foreign brokerage.
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