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The turbulent market has claimed its first high-profile casualty. Lead managers to the Wockhardt Hospitals' initial public offer have decided to call off the issue after the qualified institutional buyers (QIB) portion was undersubscribed. This is the first time that a leading group has been forced to withdraw an IPO due to poor investor response.
Wockhardt group chairman Habil Khorakiwala said: "Markets have been volatile. We wanted to respond in a manner that would be in the interest of the long-term investor. We have demanded not to extend the issue and we will deal with it appropriately at a later time." Citigroup and Kotak were the joint global coordinators to the Rs 676-crore issue.
Investors who had applied for the issue will be refunded their money within 15 days.
The fate of Wockhardt Hospitals has just added to investor uncertainty with many now questioning the viability of investing in IPOs in such a market. Another issue whose subscription appears to have fallen way below market expectations is that of Emaar MGF. A litmus test for future IPOs will be the listing of Reliance Power shares on Monday. There is a distinct possibility that many investors with borrowed money may rush to sell in a bid to recover their funds.
"The Wockhardt case is very different from an issue devolving on underwriting banks who are required to buy the unsold portion," said a senior merchant banker.
The signs were ominous from the beginning, with the issue opening for subscription a day later than stipulated. With the secondary market in a bear grip, the issue price band had to be lowered to Rs 225-260 from Rs 280-310 initially. With the market remaining volatile, the QIB and the non-institutional portion of the issue remain unsubscribed till almost Day 5.
Thereafter, Wockhardt Hospitals sought and received regulatory approval to extend its subscription process by two days. However, the extension did not help matters for the company. As per NSE data, as on February 7, Wockhardt's QIB category was subscribed 0.06 times, NI 0.0048 times and retail about 0.51 times. Interestingly, the best response of the lot came from retail investors, usually the most risk averse class of investors. "Investors had a bad experience with Fortis' IPO. As such one could say, the bad memory still lingers in their mind," said Surajit Pal, senior analyst with Standard Chartered Bank, capital markets.
Wockhardt was the first company to revise its price band downwards, amid the sell off in the secondary market, and was soon followed by Emaar MGF. It has extended its bid process by three days to February 11. The company also revised its price band at the lower end by Rs 10, with the issue now priced between Rs 530 and Rs 630.
Chances are that the Emaar issue may just about scrape through. As per latest data, the QIB category has been subscribed 0.99 times, the non-institutional category, 0.98 times and retail about 0.46 times. Grey market premium for Emaar MGF has dropped to around Rs 14-15, from Rs 40-45 a few days ago.
Another issue that is open for subscription is that of SVEC Construction. The issue priced between Rs 85-95 is to close on February 8. However, according to NSE data as on February 7, SVEC, the issue has not received a single bid in its QIB portion, the non-institutional category has been subscribed 0.45 times and retail about 0.23 times.
"Small investors have lost heavily in the F&O segment, so they will keep away for some time," said Ranjit Kapadia, head of research-PCG, Prabhudas Lilladher.
As per Prime Database, in 2006-07 public issues that were refunded include Bluplast Industries, Iigneshwara Exports, Shirdi Industries, Minar International, Yogindera Worsted, Tubeknit Fashions, Vimal Oil and Foods, Ammana Bio Pharma. For the year 2007-08, the issues refunded included IT People (India). Source : The Economic Times |
