IPOs have underperformed, despite the rally

The shares of companies that mobilised funds in 2007, including through initial public offers (IPOs), have underperformed the markets in the current rally. The stock prices of 148 companies that brought out IPOs have gained 64 per cent on an average compared with the 72 per cent rise in Sensex between March 9, 2009, and May 20, 2009.

Except construction, engineering and information technology firms, most companies that have listed in the last two years via IPOs have underperformed the equity market. Of the 148 companies, as many as 121 are trading below their issue prices. These 148 collectively raised Rs 58,703 crore from the public and have eroded 15 per cent of the wealth. Their current combined value is Rs 49,952 crore.

The BS IPO meter, which tracks newly-listed stocks, rose 61 per cent from 205.63 on March 9, 2009, to 330.31 on Wednesday. It is, however, still down 51 per cent from its all-time high of 671.48 reached on January 7, 2008.

Of the 148 companies, 55 have outperformed the Sensex and gained more than 75 per cent during the period. Thirty-eight of gained 50-75 per cent, 38 rose in the range of 25-50 per cent and 15 between 10-25 per cent.

The market value of the remaining six, Akruti Nirman, Glory Polyfilms, Spice Communications and Edserv Softsytems, has declined below the levels seen on March 9, 2009. In the current year, only Edserv Softsytems mobilised Rs 24 crore at the issue price of Rs 60 per share. It is trading at Rs 23.70 on the Bombay Stock Exchange.

Even though the market price of most real estate and infrastructure firms which launched their IPOs have more than doubled from their March 9, 2009, levels, they are still trading below their issue price. The list includes DLF, HDIL, IVR Prime Urban, Supreme Infrastructure, Puravankara Projects and Tanla Solutions.

DLF, the real estate major, appreciated 156 per cent from Rs 138.69 on March 9, 2009, to Rs 354.80 on the BSE on Wednesday. The company, which raised Rs 9,188 crore via a public issue at a price of Rs 525 per share, is trading at 32 per cent below its issue price.

Reliance Power, which raised around Rs 11,700 crore through a public issue, has appreciated 88 per cent during the period, from Rs 92.05 to Rs 172.80, but the stock is trading 39 per cent below the offer price of Rs 281.25 (adjusted after bonus shares) on the BSE.

Future Capital, Maytas Infra, Pearl Fashion, IVR Prime Urban, Omaxe and Vishal Retail are among the other companies that brought out their IPOs in the last two years and have declined over 75 per cent from the issue price.