Jun 12, 2010, 02.49 PM IST | Source: CNBC-TV18

All that you want to know about IPOs

What do you mean by IPO, why are they so popular and what should you watch out for when you try to pick one, they were almost extinct species last year but this year around there is plenty of interest thats come in from the primary market space.

Q: This whole corporate governance issue and this other point on grading of IPOs where you get a four/five but it doesnt necessarily mean you are a great issue.

Prithvi: I will divide both these items completely. I think the corporate governance; IPO grading has been a disaster as far as my analysis shows. All 1/5 and 2/5 issues have done extremely well and all 4/5 have given extremely huge losses to investors.

We have typically seen that investors it has not so happened in the case of IPO grading fortunately but we have seen that grades or ratings are actually followed very blindly and a 4/5 you cannot tell the investors that this is only a 4/5 of the fundamental analysis and does not take into account pricing because ultimately a good company is a bad investment at a high price so the investor ultimately has to take a call on the price.

On the corporate governance the less said the better because we know that most companies in India are not governed the way an ideal corporate governance structure requires them to and therefore whether you read a corporate governance report in an annual report or the prospectus you will only get numerical compliances in terms of number of independent directors, number of committees, audit committee etc but would not show whether there is ethics in the DNA of the promoter.

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