Aggressive pricing, poor advice responsible for IPO debacle

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New Delhi, Feb 18 (UNI) Aggressive pricing of initial public offerings (IPOs) and poor advice of investment bankers are the major factors behind the recent public issue debacle, a study said.

In a survey of 150 CEOs and CFOs, Assocham Business Barometer (ABB) found, though Indian stock markets have become structurally strong and well-regulated, bad pricing of the issues and weak market sentiment were responsible for pulling out of several public issues and lukewarm listing of highly profitable shares in the recent weeks.

''While the prevailing liquidity conditions in bourses play an important role in successful listing of a company's stock, valuations should not stretch into long future as it dampens investors' appetite,'' Assocham president Venugopal N Dhoot said in a statement.

While the global uncertainties played its role in poor response from the investors, the recent debacle of public issues should not be taken as an indication of a collapse in the primary market, 78 per cent of the respondents said, adding that the IPOs can be revived if good issues hit the market with attractive and not aggressive pricing.

The companies which have lined up their IPOs should ensure appropriate price bands to avoid the adverse investor response.

they suggested.

Eighty-four per cent of the ABB respondents felt that the withdrawal of primary issues is a market phenomenon which takes place even in the mature and developed markets.

A large section of corporate heads asserted that the investment bankers should give sound advice to their clients based on the market depth and the appropriate valuations of a company's scrip.

Besides, the rating assign by the credit rating agencies also play a major role in formulating investor sentiment about an issue, 65 per cent of the respondents said.

Nearly 72 per cent of the CEOs surveyed believed that investor community in the country gets swayed by the market intermediaries. Blaming the 'grey market', they said the SEBI should come down heavily on market manipulators who raise investors' expectations in the unofficial market.

Talking about the conditions in the IPO market in the near future, about 45 per cent respondents said the primary market may remain bleak for quite some time.

India is one of the world's largest IPO market as the valuations crossed Rs 34,000 crore in the year 2007, with more than 100 companies raising IPOs.


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