With 2010 proving to be a bumper year for the primary market, it is worth noting that of the 73-odd initial public offerings (IPOs) and follow-on public offerings (FPOs) that went public during the year, nearly half are quoting at a discount to their offer price.
The reason for this has been overpricing of IPOs and in certain cases, poor corporate governance standards.
The IPOs of BS Transcomm, Aster Silicates and DB Realty reflected this malaise and as a result investors lost significant amounts of money.
With the rebound in the equity markets, many realty firms had queued up to go public with the hope of getting premium valuations.
These included Lodha Developers, Embassy Group, BPTP and also, Emmar MGF. Of the handful of realty IPOs that hit the market like that of Prestige Estates, Oberoi Realty and DB Realty, none have managed to sustain above its IPO price post listing.
Realty stocks have been dumped time and again by market participants due to their poor performances, low transparency and poor corporate governance record. With the fall of DB Realty, the worst fears of market participants seem to have come true.
The shares of DB Realty were recently trading at Rs 194 as compared to its issue price of Rs 468, following the buzz of its management's alleged involvement in recent scams.
At a time when the telecom stocks seemed to have returned to favour after a downgrade, the IPO of BS Transcomm hit the market. It manufactures telecommunication and transmission towers, power substations and other services to telecom infrastructure and power transmission companies.
The stock surged to a high of Rs 508 within a week of listing against the issue price of Rs 248. However, news of credit rating downgrade and pledging of shares by the promoters was a blow for it and now, the stock trades at Rs 123-a decline of about 50 per cent from its IPO price.
In a bull market, small IPOs enter relatively unnoticed and often the issuers and their 'consultants' laugh all the way to the bank at the expense of gullible IPO participants.
The IPO of Aster Silicates and its post listing price graph is a testimony to this fact.
Aster Silicates, raised around Rs 53 crore. Within a couple of days of listing, this stock gained over 100 per cent and once the gullible ' bees' flocked to the honey- pot, the jar was shut. The stock was recently trading at Rs 35 per share, lower by a staggering 75 per cent against its IPO price of Rs 118 per share.
Those who participated in these three IPOs will think many times before participating in another. While they would certainly be a lot poorer now, hopefully the experience would have made them a little wiser too.
(Ashok Kumar is the promoter of theIPOguru.com and director of Lotus Knowlwealth)Courtesy: Mail Today 
Special 
