Posts Tagged ‘public holding’

Did IPO Grading Fail to Catch the Fancy of Investors??

ipo grade system

The grading system of initial public offers (IPO) is in need of an upgrade, say market participants.

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Two years after it was first introduced by market regulator SEBI, the system has failed to catch the fancy of investors as share price trends of newly listed companies have shown little or no correlation to the grading given by rating agencies.

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“IPOs with grading 4 have shown returns that are much lower than IPOs with grades 1 and 2.
So, this is raising the question whether it is time to look at amendments to the existing structure or maybe SEBI can think of completely scrapping the system,” said Jagannadham T, equity head of SMC Capitals.

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However, one can’t deny the importance of the IPO grading system not only is it beneficial for retail investors who don’t have the time or skills to go through an entire prospectus but it also acts as a deterrent for fly by night promoters who wish to access the primary market solely for their gains.

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Not only financials of a company is looked at but also people at the business head level are contacted to see what the company is up to.

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As per few experts, IPO grading doesn’t have anything to do with the price post listing. A lot of things apart from fundamentals drive the stock.

The reservation of comment on pricing is a sore point, but even more, is the grading of a SEBI barred company like Austral Coke at Grade 2 by CARE above Orbit Corporation at 1 by the same rating agency.

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And this makes one wonder if a thorough due diligence is done by all rating agencies that’s ground enough for a review.

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NHPC IPO subscribed over 16 times :)

NHPC IPO

The issue received bids for over 2,762.99 crore shares against 167.73 crore shares on offer, as per the data available on the National Stock Exchange.

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The initial public offer of hydro power producer NHPC got subscribed over 16 times with most of the bids coming in from institutional investors.

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The offer, which is expected to mobilize up to Rs6,000 crore making it the second largest IPO in the country till date after Reliance Power’s, will close on Wednesday.

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Marketmen said the portion reserved for qualified institutional investors and high networth individuals got subscribed nearly 20 times each, while the retail investors portion was subscribed over three times the shares on offer.

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“The subscription by institutional investors is likely to go up further and the retail participation would also increase towards the end of bid timing,” SMC Capitals equity head Jagannadham Thunuguntla said.

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Analysts said being a public sector firm, NHPC is getting attention from various categories of investors.

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This is the first stake sale by a state-run company in the last one and a half years, after REC raised over Rs 1,600 crore in February.

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The  of the issue has been fixed between Rs 30 -36.

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Promoter stake reduction could raise Rs.159,000 crore :O

Promoter stake reduction could raise Rs.159,000 crore :O

Listed companies could raise over Rs.159,000 crore if Finance Minister Pranab Mukherjee’s proposal to reduce promoter stake in all listed companies to 75 percent becomes a policy , a report released Wednesday said.

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Of this, state-owned firms alone will contribute as much as Rs.138,000 crore, the report by broking firm SMC Capitals said.

Among the listed companies, there are about 180 firms where promoters hold more than 75 percent of the equity.

Of these, 28 are public sector units (PSUs),while the remaining 152 are private companies,said the SMC report.


“To comply with the proposal of reducing the promoters’ stake to 75 percent, the total value of stake that needs be offloaded is a whopping Rs.159,263 crore,” said SMC Capitals equity head Jagannadham Thunuguntla.

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“Of this amount, stake sale in PSU companies will aggregate to about Rs.138,075 crore, and that of non-PSUs will be Rs.21,188 crore,” he added.

Mukherjee had said in his budget proposal July 6 that the government would look at increasing public stake in all listed companies to 25 percent, which currently is about 15 percent.

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The chairman of the markets watchdog, Securities and Exchange Board of India (SEBI), has however proposed to the government that the increase in public holding be done in a phased manner and companies given time to dilute promoter holding to 75 percent.

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“Keeping this account, it will be more practical and sensible to implement this regulation in a phased manner by the finance ministry, facilitating smoother implementation,” said the report. 🙂