Monday, 20 February 2012

IPO Peformance - 2012


Every Coin has two faces. So does the Stock Market. One side of the coin is wonderful; it’s so tempting that you curse yourself if you don’t understand the stock market. The other side of the stock market is so horrifying that you will curse for knowing or venturing into stock market.
Good face:
    10000 invested in Infy in 1985 would have grown to 40 Crore+ Today.
    10000 invested in Wipro in 1980 would have grown to 100 Crore + 

Bad Face:
    100000 invested in Satyam in 2008 your Investment Value would be less than 2500 in Jan 2009. (Satyam Stock tanked from Rs 544 to Rs 11.)
    100000 invested in PentaMedia Graphics in 2000, your investment Value today would be around Fifty Rupees. Yes you READ IT RIGHT its only 50 Rs.
    100000 in GTL Ltd, your investment value would be less than Ten thousand in a years’ time.  (The stock price tanked from 430 Levels to 30 rupees. Loss of more than 90 %)
We have learnt from our financial Analysts that IPO are best options to invest money for individual investors. The lessons have been nailed in such a way that in spite of burning our fingers we are yet to learn a Lesson. Let us see the Good and Bad Face of IPO.
Good Face of IPO:
·     IPO were always known as Wealth Creators.
·     Investors who opted for IPO’s like Wipro, Infy, L&T, SBI,  etc were able to create enormous wealth. Even the future generation can enjoy this wealth created by staying put with these companies. 
Bad Face of IPO:
·     Off Late they are known as wealth destructor.
·     Performance of IPO in the last few years has been pathetic. Almost 70% IPO are trading well below their Issue price.
·     Even IPO’s backed by government have been disappointing.
·     Brand Names like Reliance, L&T were able to drive investors but failed in giving decent returns.
Let us peep in and do some analysis. Let us try and what could be the reason for investors loosing up to 90% by investing in IPO’s.
·     Today IPO is all about company’s ability to market the offer.   Oversubscribing and Luring investor is no big deal, All that it takes is good relationship with Analyst/broker, media, writer etc.
·    Companies are aggressively pricing the prices and leaving no room for appreciation.
·    Rating provided by rating agency is often ignored by investors. Even if the rating is good, IPO fails to deliver good returns.
·    SEBI has not been able to stop companies that are going public to create wealth for themselves and Marketing Team.
Below list would give you an idea how IPO would have eroded your investment.More than 250+ IPO’s have come up in last 3 to 4 years. Approximately 65 to 70% of IPO are trading less than the Issue price.
S.NoCompanyList MonthIssue PriceCurrent PriceLoss in %
1Glory PolyfilmJuly-0748491.67
2Reliance PowerFeb-0845012672.00
3Gammon InfraApril-081671690.42
4Lotus Eye CareJul-08381073.68
5Sejal GlassAug-081151487.83
6Nutek IndiaAug-08190199.47
7Raj Oil MillAug-0912015.587.08
8Aqua LogisticsFeb-102201294.55
9Syncom HealthCareFeb-10751678.67
10Tarapur TransformerMay-10752073.33
11Aster SilicatesJul-1011812.589.41
12sks MicrofinanceAug-1098513885.99
13Cantabil RetailOct-101352482.22
14Shipping CorpDec-101407745.00
15Acropetal TechMarch-11901682.22
16Shilpi CableApril-11691676.81
17Bharatiya GlobalJuly-1182989.02
18Brooks LabSept-111002575.00
19Vaswani IndSept-11491079.59
20SRS LtdSept-11583441.38
21RDB RasayansOct-11791087.34
22Tijaria PoloyPipesOct-11601083.33
23Taksheel SolOct-111501689.33
24M&B SwitchgearOct-111867460.22
25Indo Thai SecNov-11741481.08

#Current Price have been rounded off - 20-Feb-2012 Price
Who is responsible for this? Is it SEBI? Is it the companies who come with IPO to lure investors Money? Is it the Media who creates the Hype? Or is it the Rating agency?
You will keep haunting for the right answer. One thing is for sure, Individual investors are at the receiving end. Junk and Wealth Destructing IPO’s will keep coming till we individual investors stop pumping money into them.

Take away: If you see the data, IPO is all about Promoters getting rich at cost of Investors Money.
It’s Time to WAKE UP. Do you agree?


Cherry said...

Yes.. I completely agree with you. Thanks for the wonderful article. Of course there are some companies which have fared well after the IPO. But most of them are trading at price lower than the issue price.

WealthUCreate said...

IPO were best means of investing money for individual investor. Off late, IPO are something that wipe out your investment. Better play wait and watch game.

Gaurav said...

Currently most of the blue chips which are fundamentally very strong like - BHEL, L&T, Reliance Ind, Hindalco, Petronet LNG are available at soo good rates, do you think its good time to invest in them or still more correction is in store in near future.

WealthUCreate said...

BHEL and L&T are my Fav. I would play a Watch out Hindalco from a fence for a bit. Hindalco is a very good company, however metal sector has been out of favor from quite some time now.

If you are having long term horizon 5 + years you can buy BHEL and L&T in SIP Mode. Petronet LNG - I dont track.

Gaurav said...

Onething more, I have been visiting your blog for some days now and also following you on Asav's blog, here I dont find any link where I can directly interact with you in terms of sending message, m I missing something here ?

WealthUCreate said...

Hmm... Thanks for spending your valuable time reading my articles. The blog has my contact info. You can reach me any time through email -
I will try my best to respond back at the earliest.

Any thing else i could do sir? Keep in touch

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