The flurry of IPOs hitting the market makes one really ponder.Whether these companies are flooding the market for resouces or they are simply tapping the market flooded with resources???A decade back some of these companies offer documents would'nt have even warranted a look from the investor. Check out some issues from the past year:
Ramsarup Industries
Radha Madhav Corporation Ltd
Shri Ramruprai balaji Steels Ltd
Era Constructions IndiaLtd
Saksoft Ltd
Ramksrishns Forgings Ltd
Surya Pharmaceuticals Ltd
Today, the ever discerning, IPO crazy Indian Investor would go to the extent of covertly opening 50,000 Demat Accounts to win a better lottery in the allotment of the quota for retail investors. Some of the companies came out with measly issue sizes , like Saksoft for Rs. 7.5 Crores. If you doubt whether these issues were fully subscribed, you will be surprised by how many times...
Any layperson can tell you that equity entails and contributes to high cost of capital, that too at a time when interest rates are going down the hill. So why are these corporates going the equity route??? At the macro level, the poverty level in India has come down steeply to 26%..Economy is booming, and then the market is flush with funds from increased salaries and profits with limited investment options. At the micro level the burgeoning SINK & DINK households, are wondering where to invest money, earn high returns and pay paltry tax...Enter the stock market..through the primary doors of IPO. FDs interests have fallen and so the interest in FD. Plethora of mutual funds confuse their simple minds.Hence IPO. Gone are the days of filling those long application forms, running to the nearest collecting center, getting turned away because the of broker code! Now, your DP service provider entices you with sms of the upcoming offers and that your IPO application is just a CLICK away(so is your passbookdebit!)
These hitherto unknown companies have sensed the pulse of restless Investor who is desperate to jump into the swelling stock market and share a pie. Moreover getting a bank loan involves much more formalities than IPO( specially after the exit of CCI)! But investors much excercise due caution/diligence before putting their hard-earned money into companies. Every bubble must burst.
By the way, I enjoyed a Parody on IPOs in DNA Newspaper:
Beggars jump on the IPO bandwagon
Ramsarup Industries
Radha Madhav Corporation Ltd
Shri Ramruprai balaji Steels Ltd
Era Constructions IndiaLtd
Saksoft Ltd
Ramksrishns Forgings Ltd
Surya Pharmaceuticals Ltd
Today, the ever discerning, IPO crazy Indian Investor would go to the extent of covertly opening 50,000 Demat Accounts to win a better lottery in the allotment of the quota for retail investors. Some of the companies came out with measly issue sizes , like Saksoft for Rs. 7.5 Crores. If you doubt whether these issues were fully subscribed, you will be surprised by how many times...
Any layperson can tell you that equity entails and contributes to high cost of capital, that too at a time when interest rates are going down the hill. So why are these corporates going the equity route??? At the macro level, the poverty level in India has come down steeply to 26%..Economy is booming, and then the market is flush with funds from increased salaries and profits with limited investment options. At the micro level the burgeoning SINK & DINK households, are wondering where to invest money, earn high returns and pay paltry tax...Enter the stock market..through the primary doors of IPO. FDs interests have fallen and so the interest in FD. Plethora of mutual funds confuse their simple minds.Hence IPO. Gone are the days of filling those long application forms, running to the nearest collecting center, getting turned away because the of broker code! Now, your DP service provider entices you with sms of the upcoming offers and that your IPO application is just a CLICK away(so is your passbookdebit!)
These hitherto unknown companies have sensed the pulse of restless Investor who is desperate to jump into the swelling stock market and share a pie. Moreover getting a bank loan involves much more formalities than IPO( specially after the exit of CCI)! But investors much excercise due caution/diligence before putting their hard-earned money into companies. Every bubble must burst.
By the way, I enjoyed a Parody on IPOs in DNA Newspaper:
Beggars jump on the IPO bandwagon
Harshal A Shah
Tuesday, January 24, 2006 19:50 IST
2 comments:
You say flurry of IPOs "makes one" really ponder. First of all, the majority clan of IPO subscribers do not ponder. Most of "the subscribers" are flush with money(keeping 'Lakshmi',Goddess of wealth captive in their dark rooms). Nobody reads any fine print-even if one wants,cannot read from those offer documents...print is such ,fine.
It may be interesting to note: i)Out of our population of 102 crores,people actually ponder to file Income Tax Return is just above 3 crore, of which tax is paid by STILL LESSER NUMBER.ii)Out of the household savers,only negligible portion goes to equity or IPO cult.
In this context, whom you refer as 'retail investers'? It cannot legitimately refer to the mass of employed getting salary/wages striving to keep their body and soul together (except,however, high profile Inf Tech clan,top executives,proffesionals etc whose earnings add perpetually to their wealth )To me those retail wallas are money bags,prepared to do any act or fraud who 'use' their money (not to pay their legitimate tax,)to open fraudulent accounts,in hundreds and even thousands,to corner more shares and pay little or no tax.These 'retail wallas' with their wealth spoil the community and the Economy.
The other aspect is the companies soliciting capital thro IPOs. In theory, it is ok for the economic development. But what about those fly by night companies still existing. Money bag investors are seldom affected. Only the investor who put his hard earned savings goes pauper!
IPO - Insolvency Petitions Offerings !!!!
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