Date : February 14, 2008

IPOs fall victim to market

 

IPO Bust-Up: Wockhardt, Emaar-MGF & SVEC Cry-Off
The crown is slipping: India, which was hailed as the world's largest initial public offering market this year, is becoming chary of new offerings. Wockhardt Hospitals became casualty, when poor investor response forced it to scrap a $165 million share issue. And Emaar-MGF followed suit. SVEC construction bids for only about 15% of the shares on offer.

"The decision not to proceed with the IPO was made in light of continued global and domestic market volatility and poor market sentiments," said a release from Wockhardt, company's offering was priced expensively relative to its peers. Companies' efforts to tap the markets have drawn a unenthusiastic response. Since Reliance Power's record offering in January, which was oversubscribed 72 times $189 billion in bids. Concerns about the U.S. economy, the Pulling out of funds by foreign investors and weakness in IPO markets elsewhere in Asia and Europe have turned Indian investors cautious. The Bombay Stock Exchange's benchmark Sensex index declined 13% in January

Following companies withdrew IPO:

Wockhardt:
Wockhardt was proposed to enter the capital markets on January 31, 2008 with a public issue of 25087097 shares of Rs10 each through a 100% book building process. Through this IPO Company was raising approximately Rs 149.33 Crores. Wockhardt received orders equal to a fifth of the shares on offer, despite extending the closing date. It also cut the price band for the 25.1 million-share issue to 225-260 rupees a share from 280-310 rupees.

Emaar MGF:
The Indian arm of the Middle East's largest property developer, Emaar was proposed to enter the capital markets on February 01, 2008 with a public issue of 102,570,623 shares of Rs10 each through a 100% book building process. Through this IPO Company was raising approximately Rs 7,077 Crores. Emaar MGF had pushed back the closing date of its IPO by five days and has twice reduced the lower end of its price band since Jan. 31; the IPO has been subscribed just 0.83 times as of Thursday, according to the Web site of the National Stock Exchange of India.

SVEC Constructions:
Smaller offerings by Indian companies have also had a difficult time catching investor attention. SEVC Constructions Ltd. offered IPO of 40,00,000 equity shares of Rs.10 each. The issue was open on Monday, 4th February and had close on Friday, 8th February 2008, The IPO of SVEC Constructions, which closes Friday; the price band was also revised to Rs.80-90 from the earlier band of Rs. 85-95. The issue was subscribed 23 percent times.

Investors have become cautious of exposure in IPOs because of the volatile markets here. Also, the valuations are running ahead of fundamentals. Most recent issues looked at earnings multiples that were projected way into the future and assumed very aggressive growth. The IPO market in India is unlikely to revive this month or in March, which marks the end of the fiscal year and is a tight period for liquidity. The earliest revival may be in April. Liquidity is not a problem, and investors are willing to fund growth stories. Companies that have strong business values and come with reasonable valuations will get subscriptions.

Thanks and Regards,

PMS Department