Investor wealth destroyed: These 5 IPOs lost over 80% in 2011

If 2011 proved anything, it was that investing in initial public offerings was a losing proposition.

Investors lost around Rs 4,098 crore in the IPO market this year because the secondary market was turbulent, reflected by the steep 25 percent fall in the Sensex this year. Even though the total amount raised during the year through IPOs was Rs 14,112 crore, the current mark-to market value has eroded to Rs 10,014 crore. Of 39 public issues of 2011, a whopping 30 public issues are trading below their issue prices, thereby destroying 29 percent of investor wealth.

[caption id=“attachment_161684” align=“alignleft” width=“380” caption=“Reuters”]  [/caption]

No wonder then, large companies refrained from straying into the IPO market; only the smaller ones waded in. In fact, as a report by SMC Global Securities noted, 2011 was a big year for small issues.

More from Investing

MSMEs are breaking the traditional convention. Look who’s funding them Scale-up your startup without an investor! Here’s how

About 64 percent of public issues this year were below the Rs 100 crore mark, the report noted. “Large public issues have found it difficult to attract investors, clearly reflecting the underlying bearish sentiment of the capital markets” wrote Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.

Worse, a large proportion slipped below their offer price after listing on the stock exchanges.

Firspost compiled a list of the top five biggest IPO losers of 2011. For our calculations, we compared the prices of IPO listings as on 19 December with their offer prices.

•The biggest loser was Taksheel Solutions, an IT company. Its shares have lost a phenomenal 92 percent since listing.

[caption id=“attachment_161680” align=“aligncenter” width=“489” caption=“Taksheel Solutions has lost a whopping 92 percent”]  [/caption]

The stock is currently trading at Rs 12.5 compared with its offer price of Rs 150. Even on its debut, the stock lost a hefty 61 percent. The Hyderabad-based company had approached the markets to raise Rs 82.5 crore to set up two software development centres and for acquisitions. The company was assigned a grade 2 rating from Care, indicating below-average fundamentals.

Continues on the next page

•RDB Rasayans came second, tumbling 90 percent to Rs 8.47.

Firspost had reported earlier that the promoters raised Rs 35.55 crore from the market to increase their manufacturing capacity. However, there were several concerns about the company, including the fact that it had not even placed orders for 98 percent of the equipment and machinery required.

Continues on the next page

•The third-biggest loser was Bharatiya Global Infomedia, which sank by 89 percent to Rs 9.

[caption id=“attachment_161704” align=“aligncenter” width=“491” caption=“Bharatiya Globalsank 89 percent to Rs 9.”]  [/caption]

The company had raised Rs 55.1 crore to purchase an office at Noida, upgrade its digital post-production studio, expand research and development facilities and pay off bank loans, among other things.The company was assigned a grade 2 rating by CARE, indicating below-average fundamentals.

Continues on the next page

•The next big loser was Acropetal Technologies, whose shares plunged 87 percent to Rs 11.43 per share from their offer price of Rs 90. A noteworthy point: it was the only IPO among the top five worst-performing IPOs whose shares closed above the offer price on listing day. The company raised Rs 170 crore primarily for acquisitions. The company was assigned a grade 3 rating by ICRA, indicating average fundamentals.

[caption id=“attachment_161705” align=“aligncenter” width=“491” caption=“Acropetal Tech shares plunged 87 percent to Rs 11.43 per share from their offer price of Rs 90.”]  [/caption]

Interestingly, even as the stock price started to fall, the promoters raised their stake to 47.56 percent by the end of September-ending quarter from about 44 percent in the June-ending quarter.

Continues on the next page

•Finally, Shilpi Cable tumbled by 87 percent to Rs 9.33 from its offer price of Rs 69.

[caption id=“attachment_161710” align=“aligncenter” width=“490” caption=“Shilpi Cable tumbled by 87 percent to Rs 9.33”]  [/caption]

The company was given a grade 1 rating by CARE for below-average fundamentals for a host of reasons: posting losses in previous years, facing a liquidity crunch that led to delays in the repayment of term loans, high working capital and relatively high gearing. The promoters hold a majority stake in the company (74.88 percent).