 "L&T Finance Holdings makes a poor debut")
Shares of L&T Finance Holdings made a disappointing debut on the BSE on Friday as they traded slightly below their initial public offer (IPO) price of Rs 52. The company isa subsidiary of engineering and construction company Larsen and Toubro.
The stock opened at Rs 51 and briefly jumped to Rs 52.50 – the day’s high so far – before drifting lower to around Rs 50.Investors had earlier expected the stock to have a stronger debut, but given the recent market turmoil, those expectations were scaled down.
Nevertheless,Ravi Kapoor, managing director and head - equity capital markets, Citigroup, insisted that it was a “
great listing
”. " I must say that it is a great listing, considering the fact that ever since the issue got closed, the Sensex and Nifty have corrected between four percent and five percent. The stock is showing quite a bit of resilience. … All in all, we are very happy," he told CNBC.
Citigroup was one of the lead managers of the issue.
The Rs 1,245 crore issue was the largest fresh share sale in 2011. There were 25 IPOs this year, although most of them were very small - between Rs 30 crore and Rs 100 crore.
More importantly, about 60 percent of these stock listings have not met with much success and are trading below their issue prices currently.
L&T Finance Holdings’ new share issue was being viewed as a barometer of current retail investor sentiment towards the primary (IPO) market.
Over the past year, investors have shied away from the primary market over concerns that most of the share sales were overpriced (even L&T Holdings was considered to be an expensive share offer), even as companies refused to sell new shares at lower valuations. The state of the economy has not helped. High interest rates, high inflation and high input costs have also made companies reluctant to tap the equity markets.
Indian firms are believed to have pulled back plans to raise more than Rs 30,000 crore in IPOs this year, according to media reports .
Making matters worse, in recent days, local stock markets have been pounded by a sharp global sell-off by investors worried by the possibility of a recession in the US and a spreading debt contagion in Europe.
In an interview with the Financial Express newspaper, S Ramesh, chief operating officer of Kotak Investment Banking said that companies were tapping private equity instead of the primary markets, as well as convertible bonds denominated in euros and other forms of foreign debt.
Even in Europe, the mood in the primary markets is glum. According to a recent Financial Times report , almost $10 billion of IPOs were pulled in Europe in the first half of the year. Globally, IPOs worth $12.6 billion were formally shelved in the first six months of the year, according to Dealogic.