IPO Era is Back

Today Aug 28, 2006 we just saw an amazing listing of Tech Mahindra shares on our big stock exchanges. They had issued 15mn shares and the offer price was Rs.365/-. Today it was the D-day for Tech Mahindra as its shares were to be listed today. And guess what, it opened huge 47% above the issue price and later ending the day on price of Rs.554/-.

What does that signify? One – the setting of price band was too low. Reason – may be because of recent IPOs performance. Many of them couldn’t even get fully subscribed. Latest was Deccan Aviation, which still is trading around 2/3^rd of issue price. These incidents could have forced the Financial experts to set the price band little lower, so as to get oversubscribed. But if you consider US point of view, they consider that if an IPO gets oversubscribed, then that means that the experts failed to assess the market sentiment. But here we consider that more the oversubscription, the better. In a sense this kind of sentiments allowed the IPO scam in the first place.

Two – it’s about time that we will again be seeing huge IPOs and even bigger gains on listing and in turn money laundering. Just hope that we don’t go back to the IPO scam. Now SEBI needs to be even more cautious as now have IPOs like DLF. We might see another listing where the market cap would soar in matter of days.

Reason to this could be that we are nearing the all time highest level of markets, so the secondary markets seem out of steam and not attractive any more. So the investors are turning to the primary market. So next time you get the opportunity to invest in an IPO, don’t let it go. You might be missing out on huge profit.