Vaswani Industries listing halted; all this year’s listings and most of last year’s trade below issue price.
The Securities and Exchange Board of India (Sebi) has halted the listing of Vaswani Industries and launched investigations into the issue. Around 3,000 retail applicants withdrew their applications and several others were disqualified due to stop-payment of cheques.
Yesterday, the IPO of speciality chemical manufacturer Galaxy Surfactants was withdrawn by its promoters due to poor investor response. At a price band of Rs 325-340, the company was planning to mobilise about Rs 200 crore through the offering.
| CRASH COURSE | ||||
| Name |
Date of listing |
Issue price (Rs) |
May 19, 2011 (Rs) |
% chg |
| Shilpi Cable Tech | 8-Apr-11 | 69.00 | 21.90 | -68.26 |
| Servalakshmi Paper | 12-May-11 | 29.00 | 13.65 | -52.93 |
| Innoventive Inds | 13-May-11 | 117.00 | 83.15 | -28.93 |
| Paramount Printpack | 9-May-11 | 35.00 | 25.40 | -27.43 |
| Muthoot Finance | 6-May-11 | 175.00 | 133.50 | -23.71 |
| Future Ventures India | 10-May-11 | 10.00 | 8.15 | -18.50 |
| Data compiled by BS Research Bureau | ||||
Sources say Sebi’s concerns emerge from fears that a majority of the applicants could be dummy investors, acting on behalf of a few big operators. In the recent past, the market regulator had initiated probes in the dealings of several initial public offerings (IPOs), as all the new listings of the current financial year and 70 per cent of those in 2010-11 are trading below their issue price.
"Most small IPOs trading below their issue price should not be looked at. Subscripttions in these IPOs have been suspicious. Genuine retail investors have actually stayed away from IPOs," said Prithvi Heldia of Prime Database, which tracks the primary market closely.
Experts believe dummy retail investors are still being used to create artificial demand for small IPOs. Sources said Gujarat-based operators ‘Barter’ and ‘Rangeela’ and Mumbai's ‘NS’ are known for IPO manipulation and have been under the Sebi scanner. They are said to strike a pre-IPO deal with promoters and put in large dummy subscripttions. Once the stock is listed, they exit in large chunks by selling shares above their cost of purchase.
"The situation could be similar to the IPO scam involving Rupalben Panchal, who operated multiple demat accounts and put several applications," said an exchange official.
These operators have come under the Sebi scanner after an Intelligence Bureau report mentioned their names.
In some small IPOs, subscripttion was put in only by a few retail and high net worth investors, whereas institutions stayed away.
Vaswani Industries, which planned to raise Rs 50 crore through its IPO, offered 10 million shares at a price band of Rs 45-49, and the issue was subscribed over four times. The merchant banker, Ashika Capital, fixed the price at Rs 49. After many investors withdrew their applications, Vaswani Industries allotted 75 per cent of the number of shares that retail investors had bid for against an expectation of 25 per cent when the bidding had closed.
Among the IPOs listed during the current financial year, Shilpy Cable is down 68 per cent from its issue price, Servalakshmi Paper is down 50 per cent, Innoventive Industries is down 28 per cent, Paramount Print down 27.4 per cent, Future Ventures down 18.5 per cent and Muthoot Finance is down 11 per cent from the IPO price.
Among last year’s IPOs, Gyscoal Alloys, Sea TV Networks, Tirupati Inks, Aster Silicate, Cantabil Retail, Commercial Engineers & Body, Tarapur Transformers, Microsec Financial, BS Transcomm and Midfield Industries are among the top losers in percentage terms.
Source: News
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