Sucheta Dalal :QIBs and NIIs shy away from fundamentally poor & overpriced IPOs
Sucheta Dalal

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QIBs and NIIs shy away from fundamentally poor & overpriced IPOs  

April 29, 2010

 Qualified Institutional Buyers (QIBs) and Non-institutional Investors (NIIs) have preferred to stay away from the recently-opened low-profile initial public offerings (IPOs). Tara Health Foods Limited (THFL) which opened for subscription on 28 April 2010 has received an overall subscription of zero on day one.


The issue closes on 30 April 2010. QIBs and NIIs have completely avoided the IPO which saw zero subscription out of 35 lakh and 15 lakh shares reserved under their respective quotas. The company has 85 lakh shares on offer. The issue is priced at a whopping price band of Rs180-Rs190 per share while the company has posted a net profit of just Rs16.99 crore in the year ended March 2009. The fate was similar in the retail investor category which saw 0.0047 times subscription. Fitch has assigned‘IPO Grade 2’ to THFL which indicates ‘below average’ fundamentals.

Similarly, retail investors have given a thumbs-down to the two IPOs of Nitesh Estates Ltd and Mandhana Industries Ltd which hit the market this week.

Mandhana Industries Ltd, which opened on 27 April 2010, received 0.19 times subscription from retail investors on day two. The company has set a price band of Rs120-Rs130 per share. The issue closes today. CRISIL has assigned an ‘IPO Grade 3’ to Mandhana Industries indicating ‘average’ fundamentals. Nitesh Estates Ltd, which closed on 27 April 2010, has received a subdued 0.22 times subscription from NIIs and 0.16 times the subscription in the retail investor category. Overall, the issue has been subscribed 1.27 times out of the 6.41 crore shares on offer. The issue has been rated ‘IPO Grade 2’ by ratings agency CRISIL which implies ‘below average’ fundamentals. The price band was Rs54-Rs56. Its profit after tax (PAT) was Rs2.85 crore for the year ended March 2009.

Even Mandhana Industries Ltd’s IPO which closes on 29 April 2010 has received 0.19 times subscription on the second day from the retail investor category. Meanwhile, Tarapur Transformers Ltd, which closed yesterday, has managed to get just 0.03 times subscription on the last day from QIBs. It recorded a PAT of Rs2.15 crore in FY09. The issue closed on 28 April 2010. — Ravi Samalad


-- Sucheta Dalal