Wockhardt Hosp fair value at Rs 175

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Current order book at Rs 2300 cr: IRB Infra Appetite for Emaar MFG might be lower IRB Infra fixes issue price at Rs 185/sh Emaar MGF IPO extends by 5 days to Feb 11 Emaar MGF IPO: will you make a quick buck? Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty?

CNBC-TV18's Executive Editor, Udayan Mukherjee - There is no material price revision in Emaar MGF price band. I think there are two technical points, one Emaar got an extension by lowering its lower end of the price band by Rs 10. There should be a concept of materiality out there. You cannot just say because you can only extend by lowering the price band then we will lower the price band by rupee or Rs 10.

Wockhardt Hospital has lowered its price band by quite a bit. It was a material reduction of the price band. Emaar just did little lip service, it said okay I cannot keep the same price band but I still want to give my investment banker some more time to beg. So I will reduce it by Rs 10, I do not think that is something, which a regulator should allow. There should be a material reduction if indeed the issue time band has to be extended.

The other interesting observation is IRB Infra where the issue has been now priced at the lower end of the band. One of the rare examples in recent times where the lower end of the band has come in but it is a good thing they have done that. Because most of the bids came in at Rs 190, 75% of the bids would have come in at Rs 190 and they priced the issue at Rs 185. So that is a good thing to happen. It created little bit of headroom for post listing for IRB, which is a good thing to happen.

On the other issues, I think the promoters are missing a point for Emaar and Wockhardt Hospitals. They are listening more to their investment bankers and less to what their investors are trying to tell them. If they just sit back and thought for a second what is the message, which has come out in the last one week from their investors. I am sure they would have worked the phones. Investors would have told them the market realities are different, you could have got away with a certain kind of pricing not that it would have been fair. But you could have got away with it maybe three weeks back but now you cannot. So you need to give us a better price point.

It is not about using a relationship with an investment banker to get the issue done in some way and then saddle some retail investors or other investors with a dead thing on listing with a great degree of certainty of the issue opening at a discount to the issue price. That is what we are heading for but once these promoters actually sat back and heard what the investors were trying to tell them I think they might have acted differently.

What would I have done in the shoes of the promoter of Emaar and Wockhardt Hospitals I would simply have come back, put my hands up and said I made a mistake. I am sorry I thought I could get away with that price but now I have relooked at it and it appears expensive so here is my new price. Forget about the extensions, here is my new price. For Emaar it would have to offer something like Rs 400-425 to get that issue done. I will not be surprised in this kind of market conditions even if they got that issue through, that the stock actually went on to list closer to that level.

You have got to give that margin of safety now to the investor in these market conditions. It is not enough to say three days more so that my investment bankers can sort of curry up some favours and get the issue pushed through somehow. You have to say I am going to give you a better price point. So give me Rs 400 on Emaar and that is the way to do the issue.

If I was in the Wockhardt Hospital's promoter shoes I would have put my hand up and said I made a mistake, I should not have put the lower end of Rs 225 as the second time when I had an opportunity to reprice so now my new prices are Rs 175. Because I do not think there is value above Rs 175 and I would not be surprised if the market remains like this.

Wockhardt Hospitals actually goes on to list if it gets subscribed in the first place at Rs 175. So that is the price you need to give the investor Rs 175 for Wockhardt Hospitals and Rs 400-425 on Emaar. Otherwise you are just leading investors up to a serious price erosion post listing and that is not the way to do an issue at all if you have aspirations of being listed for a long period of time and have the investor by your side for your trading history.