NEW ISSUES THE CONCERNS THE STRATEGY

ratio of DII and FII investments.” According to Prime database, 14 companies, including Cochin Shipyard, Matrimony.com and Bharat Road Network, have received Sebi approvals and are slated to list this year. Another nine have filed the offer document. Among these are some large names like National Stock Exchange of India Ltd, Indian Energy Exchange Ltd, ICICI Lombard General Insurance Co Ltd, SBI Life Insurance Co Ltd. and Godrej Agrovet.

Not just this, Reliance Nippon Life Asset Management, UTI Asset Management, National Insurance Company and General Insurance Company are also in the pipeline to woo investors. Analysts feel that unlike the previous bull run, where power and infrastructure were the popular themes, this time it is the domestic consumption theory that is being bet on. This will minimise risks from global factors.

So far, the bulk of the fund-raising has taken place through qualified institutional placements. In the first quarter of this financial year, Rs 33,000 crore has been raised through the IPO and the QIP route. This figure, according to Jaysankar, could reach Rs 1.25 lakh crore by the end of March 2018. Jaysankar is, however concerned and says listing gains of 50-70 per cent in some companies should not be a benchmark for future listings. “Future listings should be priced right and not viewed as a way to fetch sky-high returns like the returns given by some IPOs in the recent past. The grey market is also a reason for concern as it paints a different picture and has no correlation with fundamentals.”

“When markets are excited at listing, we are typically at the end of the boom cycle. I am afraid we might be approaching the end of the boom. What worries me is that merchant bankers will be under tremendous pressure to price issues on a par with others. This is when pricing will get aggressive. No parameters can justify that kind of pricing. This means either the listing or the secondary market will collapse,” says Bhat. In both the above situations, the retail investor stands to lose.

Not just this, when big-ticket IPOs that are lined up hit the market this year, a lot of money will move from secondary market to primary market. “There is only so much money to meet the paper supply in the market,” says Bhat. So, how should retail investors play the IPO game? “Investors should see if the private equity player is fully exiting the company. This reflects a lack of confidence in the company and is a red signal. Also, retail investors should have an exit strategy and learn to define their losses and profits, avoiding greed,” says Haldea.

Bhat says the retail investor is always at a disadvantage. “There is information monopoly. With 300-page prospectuses where negative information might be hidden or cleverly written, companies just about meet the entry norms and merchant bankers never undervalue the stock.” Unlike the secondary market, appropriate information for the primary market is not easily available for investors to make an informed choice.

So, before you jump into all IPOs head-first, remember that the Oracle of Omaha is not a great fan of investing in IPOs either. Warren Buffet says it is a mathematical impossibility to imagine that, out of a multitude of stocks to buy from, the most attractively priced would be that single company making its debut on the bourses at a date, time and price chosen by the knowledgeable seller to a lessknowledgeable buyer.

So, while you ride the IPO bandwagon, remember to put on the safety belt to avoid that furious crash. Tripti Kedia is a Mumbai- based freelance writer