2011: A big year for small IPOs, says J Thunuguntla

In a analysis report, Jagannadham Thunuguntla, Strategist & Head of Research of SMC Global Securities Limited said there were 39 public issues in 2011; of these, 17 public issues were small issues with issue sizes below Rs 100 crore. That is, 64% of the public issues were below Rs 100 crore.

According to him, during the calendar year 2011, there were only 3 public issues with issue sizes above Rs 1000 crore. This is sharply down from the 2010, when there were 14 public issues above Rs 1000 crore.

Hence, it can be said that, the large public issues have found it difficult to attract the investors clearly reflecting the underlying bearish sentiments of the capital markets. Further, considering the fact that 64% of the public issues were small issues, one can term the year 2011 as "Big year of small issues".

"One more trend that is clearly reflected during the Calendar year 2011, is that public issues have seen lukewarm subscription levels," he added.

"The lukewarm subscription levels were particularly visible under the category of QIBs (Qualified Institutional Buyers). Of the 39 public issues during the Calendar year 2011, about 26 pubilc issues have not even seen one time subscription under the QIB category. That is, 67% of the issues couldn't even get one time subscritption under the QIB category. This clearly reflects lack of conviction and confidence in the QIB circles about the IPOs during this year," he said.

According to the report, some of these public issues (where there was no QIB subscription) were literally bailed out by HNIs and Retail. Interestingly, HNIs and Retail had shown unusally high levels of risk appetite as far as IPO investing is concerned during the calendar year 2011. Their risk was rewarded by commensurate positive returns in few public issues, but many public issues have given significantly negative returns.

Jagannadham said, "The entire calendar year 2011 had seen only one PSU public issue, that is Power Finance Corporation FPO. This underlines the government's continued challenge in meeting its disinvesment targets. All remaining 38 public issues during the year came from private sector."

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To read the full report click on the attachment