See appetite for IPOs with good valuations: Prime Database

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

Q: This environment is going to force promoters though who are desperate enough to come to this market in this context of volatility, to price their issues far lower than they had probably anticipated maybe even two months ago when the market seem to be on one-way path and that was upwards?

A: Yes and therefore I considered Mahindra Holiday a brave-heart. They are willing to look at the bigger picture, look at the future, not get stuck up with valuations for 10-15% valuations, the real value would be for 85%, balance holding of the promoter which will grow as markets improve, as the company grows. I think if that is the kind of call that most promoters can take because in the current Sebi regime, most companies come with a 10% divestment or the public issue size is 10% of the total capital of which promoters still hold 90%. Let them be willing to offer a discount at that 10% offering and look at the bigger picture, look at the valuation of their own holdings and look at the fact that capital raised today can be deployed today as against waiting for the right market at some point of time when you can value your IPO at a slightly higher price. Probably that cost analysis has to be done which people have now begun to do.

Q: This question has to do with the institutional appetite for more paper in the market. We have seen a series of QIPs, in that sense, wipe out a lot of potential appetite on the sidelines. Do you think that there is that much more appetite outside there on the institutional front for another half a dozen IPOs to come into the market place?

A: There are two things; one is that the domestic institutions have not participated heavily in the QIPs of the recent period and I think they are sitting with a lot of money and they would be willing investors in IPOs which are going to be floated.

Second is institutional investors, we are talking of 1,600 foreign institutional investors (FIIs), if 15-20 of them have lost in QIPs, does not mean that the others are not willing to take a risk in an IPO from a good company at a right price. Even the same companies where institutional investors have lost in QIPs, maybe willing to compensate their losses by investing in a good opportunity. Therefore I don't think that it is closing or shutting your eyes to the Indian market because you have lost money in some QIPs. Good investment will always attack money and I have always said that there is never a bad time for a good investment. People will chase good paper and in case they find good paper coming to the market, you will find cues of investors both retail and institutional.