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Investors shy away from IPO market on uncertainty

Investors shy away from IPO market on uncertainty

Market experts do not see much action in the primary market for the next few more months as uncertainty in the equities market is scaring investors away.

After the delay of the initial public offering (IPO) of the government-owned Rashtriya Ispat Nigam Ltd (RINL), market experts do not see much action in the primary market for the next few more months as uncertainty in the equities market is scaring investors away.

The RINL public issue has been delayed by at least three weeks on advice of merchant bankers UBS Securities India and Deutsche Equities (India). The Cabinet Committee on Economic Affairs in January had approved disinvestment in RINL.

The government aims to raise Rs 2,500 crore by divesting 10 per cent stake of its 100 per cent holding in the company. Earlier, RINL was slated to hit the domestic market on 3 July 2012.

"The RINL IPO has been delayed because of uncertain market conditions and poor performance by the listed IPOs and FPOs (follow-on public offers)," says Dinesh Waghela, vice president and head of IPO, LKP Securities.

BSE IPO indexSo far only three public issues have hit the market since the beginning of the financial year. These include offerings from Tribhovandas Bhimji Zaveri (TBZ), Monarch Health Services and Speciality Restaurants.

From the date of listing, the share price of Monarch Health Services and Speciality Restaurants rose 0.25 per cent and 32.6 per cent to Rs 40.20 and Rs 213.05, respectively, as on 14 June 2012. However, the share price of TBZ declined 2.8 per cent to Rs 108 during the same period.

Already, Plastene India, Goodwill Hospital and Samvardhana Motherson Finance have withdrawn their IPOs due to poor response from investors. Plastene, Samvardhana Motherson and Goodwill Hospital IPOs were subscribed only 29 per cent, 23 per cent and 0.1 per cent, respectively.

The BSE IPO index slid 7.26 per cent to 1,443.63 since 1 April 2012 till 14 June 2012. The Sensex declined 4.6 per cent to 16,678 during the period.

Some of the public offers of government-owned firms that are in the pipeline are SAIL, Hindustan Copper, Hindustan Aeronautics, Oil India and BHEL.

"On account of turmoil in Greece and depressed market conditions, it is doubtful to see any IPO for the next two-three months," says Pankaj Pandey, head of research, ICICIdirect.com.

Published on: Jul 14, 2012, 12:00 AM IST
Posted by: Gaytri Madhura, Jul 14, 2012, 12:00 AM IST