Poor grades no deterrent for IPO-bound cos
Companies which had to defer initial public offerings due to low grades from rating agencies, are planning to make a fresh attempt.
By Shailesh Menon & Apurv Gupta, TNN |
MUMBAI: Companies which had to defer initial public offerings due to low grades from rating agencies, are planning to make a fresh attempt.
They seem to be drawing inspiration from the buoyancy in the secondary market, and to some extent the strong response to the IPO of Shree Asthavinayak Cinevision, which had also received a poor grade.
Asthavinayak was assigned a grade of two (in a scale of five) — denoting ‘below average fundamentals’ — by Crisil Research & Information Services. However, the public issue has been subscribed 6.12 times, and is likely to list sometime next week.
Encouraged by the development, Celestial Labs (graded 1 – ‘poor fundamentals’), Bhagwati Banquets (graded 2), Evinix Accessories (graded 2) and AMD Metplast (graded 3 – ‘average fundamentals’) are working hard to get listed on the bourses before market sentiment changes.
Celestial Labs, Bhagwati Banquets and AMD Metplast have Chartered Capital & Investment as their book running lead manager. According to Heemadri Mukerjea, manager — investment banking, Chartered Capital & Investment, low IPO ratings should not be a problem as it were based on factors like size of the company, project size and first-generation ownership.
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The three issues will open for subscription in a month’s time, he added. Evinix Accessories will open for subscription by the end of January. If sources are to be believed, JAS Toll Roads (graded 3) will also open for subscription soon. Cambridge Technologies, rated 2, is currently open for subscription. “Cambridge Technologies is a fixed price issue and it is doing tremendously well,” said a source with the issue lead manager.This trend assumes greater importance considering the fact that Minar International (with a grading of 2) had to withdraw from the markets due to under-subscription in September and SRS Entertainment (rated 2), did not float its IPO.
As of now, 15 companies have completed grading with three major credit rating agencies — Icra, Crisil and CARE. Icra has graded four companies, whereas Crisil and CARE have rated six and five companies, respectively. So far, companies that have opted for an IPO grading, have not been able to list successfully.
“The listing of Shree Asthavinayak could change this. This year we are hopeful that many more companies, including the larger ones, would opt for grading and get listed,” said Ajay Dwivedi, CEO, Crisil Research & Information Services.
Attributing the failure of Minar International to IPO grading will not be fair as several other factors like market performance had come into play, Mr Dwivedi added.“There is already a change in the lookout of companies towards IPO rating. Many companies are approaching us now for the same,” said Rajesh Mokashi, ED, CARE Rating.
IPO grading does not take cognizance of the price of the security. The grade only represents a relative assessment of the ‘fundamentals’ of that issue in relation to the universe of other listed equity securities in India. “It is not an investment recommendation,” said L Shiva Kumar, general manager and head, Mumbai region, ICRA, adding that, “it is one of the inputs to the investor to aiding in the decision-making process.
All other things remaining equal, a security with stronger fundamentals would command a higher market price. IPO grading is an additional investor information and investment guidance tool.”
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