Sebi gets 8 application for IPOs since Black Monday

DELHI/MUMBAI: Initial public offers (IPOs) are feeling the heat of a volatile market. Prime Focus — the company that has Rakesh Jhunjhunwalla and Adlabs as investors — has extended the bidding period and cut the price at the lower end of the band. This is the second company in recent times to do this.

But a choppy sensex hasn’t completely taken the fizz off the IPO market. Eight draft prospectuses have been filed with Sebi since Black Monday. These include Minar International, Indo Asia Leisure Services, Tubeknit Fashions, Global Vectra Helicorp, Ahluwalia Contracts, Broadcast Initiatives and Info Edge India.

This apart, PFC is expected to file its prospectus next Monday. Once the prospectus is filed with Sebi, it’s usually cleared within 30-40 days. Thereafter, the company needs to come up with the issue within the next six months. The other option being to let the date lapse and prepare fresh prospectus.

“Nobody can correctly predict the market. Companies will go ahead with their IPO plans depending on their fundamental strengths and the urgency for fund requirements,” says Ravi Sardana, V-P, ICICI Securities.

Plans may get delayed

Merchant bankers, however, say those IPOs which are still in the drawing boards could get delayed. These firms may wait for the sentiments to turn positive on the stock market before taking a final call on their public issues.

Says Prithvi Haldea, MD of Prime Database: “The overall sentiment is not good as investors are wary of a volatile market.” He adds that given the current pipeline of IPOs which can be categorised into three levels, the anxiety levels would be higher in the first two where either the issue dates have been announced or where the firms have already filed prospectus with the Sebi.

There are four firms whose issue dates have been announced. In addition, there are some 8-10 firms whose prospectus have been approved by Sebi though dates have not been announced.

There are another group of 48 firms whose prospectuses have been filed but are yet to be cleared. The third set, which according to Mr Haldea stands at around 350, are those which are yet to file their plans and would be looking out for market to stabilise.

IPO financing dries up

Prime Focus revised the terms, despite an oversubscription of 1.29 times as of May 31 — the original date of closure of offer. A small oversubscriptions softens the demand for the scrip, and is particularly bad news for investors who borrow from banks to invest in IPOs. “IPO financing makes sense only if there are huge subscriptions.

“Thanks to low oversubscriptions and weak markets, the IPO financing market has virtually dried up,’’ said merchant banking sources. It’s no longer lucrative for investors to keep a margin with the lending bank and pay an interest for the loan to invest. These investors normally sell the shares the listing happens.

Prime Focus had entered the capital markets with an IPO of Rs 100 crore with a green shoe option of Rs 15 crore, aggregating Rs 115 crore with a price band of Rs 450 to Rs 500 per share. The issue opened on May 25 and was scheduled to close on May 31.

“However, considering the volatility in the Indian and global equity markets the company has extended the bidding period till June 3, ‘06 and revised the price band to Rs 417 to Rs 500,’’ according to a company.

All eyes are on the mega DLF issue, which is awaiting the Sebi approval. The company and its bankers have till now maintained that they will go ahead with the offer once the clearance is in place.

Sebi norms stipulate that a maximum 20% revision can be made in the price band of an IPO. The IPOs bidding period can be kept open for a period of maximum 10 days.