Bangalore: If you think IPO's are a good option to invest, then think twice. The year 2011 witnessed some much anticipated IPO's bringing loss to investors. The IPO market has been a big 'wealth destroyer' with only 9 public issues out of 39 public issues that came during 2011 trading above their issue prices. The reason for declaring the IPO's as a loss is because the current market value of the public issues that were offered during 2011 is about Rs. 10,000 crore against their issue price of about Rs. 14,000 crore, resulting in a loss of Rs. 4,000 crore to the investors. Of 39 public issues of 2011, a whopping 30 public issues are trading below their issue prices, thereby destroying 29 percent of investor wealth.
This is the reason why at least 25 companies have called off their Initial Public Offer plans so far in 2011. And these 25 companies were together estimated to raise about Rs. 31,000 crore worth capital to fund the companies' business expansion plans. The 2011 IO had only 3 issues or 8 percent of them that were above Rs. 1,000 crore while there were 11 issues between Rs. 100 crore and Rs. 1,000 crore and 25 issues were below 100 crore. For example, Taksheel Solutions which came out with a Rs. 83 crore IPO is now worth Rs. 7 crore, a decline of 92 percent. RDB Rasayans IPO of Rs. 36 crore is now worth only Rs. 4 crore — a fall of 90 percent.
The existing trend in the IPO market may create panic in the private equity (PE) funds, as they would be unable to exit from their investments. High pricing in public issues; and lower quality of public issues has caused such great wealth erosion.
This is the reason why at least 25 companies have called off their Initial Public Offer plans so far in 2011. And these 25 companies were together estimated to raise about Rs. 31,000 crore worth capital to fund the companies' business expansion plans. The 2011 IO had only 3 issues or 8 percent of them that were above Rs. 1,000 crore while there were 11 issues between Rs. 100 crore and Rs. 1,000 crore and 25 issues were below 100 crore. For example, Taksheel Solutions which came out with a Rs. 83 crore IPO is now worth Rs. 7 crore, a decline of 92 percent. RDB Rasayans IPO of Rs. 36 crore is now worth only Rs. 4 crore — a fall of 90 percent.
The existing trend in the IPO market may create panic in the private equity (PE) funds, as they would be unable to exit from their investments. High pricing in public issues; and lower quality of public issues has caused such great wealth erosion.
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