Investors shying away from IPO market?

The number of applications received by the two Initial Public Offerings (IPOs) so far in 2014 appears to be giving an indication of tepid investor appetite prevailing in the country’s capital market, despite continuous efforts by Colombo Stock Exchange (CSE) and Securities and Exchange Commission (SEC) to promote the capital market as a viable investment option among Sri Lankan public.

The two IPOs, Millennium Housing and Alumex—latter’s shares are yet to hit the market— were among the share issues which have received least number of applications in the recent IPO history of Colombo Stock Exchange.

The number of applications Alumex IPO received from investors remained at 849 above the 310 applications received by Anilana Hotels IPO, but way below 3, 781 application received by Amana Bank IPO, 13, 025 applications received by Expolanka IPO, 22, 711 applications received by Odel IPO and 63, 711 applications received by Union Bank IPO.

The first IPO in 2014, Millennium Housing Developers, received 367 applications.

Meanwhile, a look at the application breakdown and the number of shares applied, it becomes clear that majority of shares offered have ultimately been bought either by the promoters or related parties.

For example, despite the 835 applications from the total 849 applications Alumex IPO received were from public investors, their shareholding only amounted to 12.4 percent.

Though this public shareholding meets the requirements of the secondary Diri Savi Board, Alumex dose not appear to have qualified for the tax concession offered in the Budget 2014 for companies which go public before 2014 April and maintain a 20 percent public free float for three consecutive years.