Ruma Dubey

The market is indeed the best teacher of life lessons. Even to the most arrogant, it brings in humility. At least that seems to be an important lesson which the Biyani group seems to have learnt.

There would be many, still hurting from the tight slap given by the IPO of Future Capital. This IPO will go down in the history of Indian capital markets for being one of the most aggressively priced IPOs of today's times. On 10^th Jan 2008, the BSE sensex touched its life time high at 21,078. And on 11^th Jan, its IPO opened for subscription, at the upper price band of Rs.765. This was priced 76 times the face value. The company valued itself at Rs.4900 crore. Sadly, though the company managed to get the issue more than filled up, even three years on, investors in the IPO continue to suffer. Today, the stock is at Rs.168 levels and its market cap is at Rs.1089 crore. Its 52-week high is at Rs.302.20 and low at Rs.131. Little wonder then that at every rise, there are always more sellers than buyers on the counter.

And probably still scathing from the fiery AGM of 2009, where the Board faced the ire of the investors, another group company, Future Ventures is offering shares in its IPO at almost par. Priced at Rs.10-11, Biyani hopes to ease the pains caused by his earlier issue. This, many say, is like a 'Big Bazaar' issue, based on the low pricing of the IPO.

Apart from trying to appease the hurting investors, this low pricing is a smart move as we rarely come across issues, that too from a well known business house which has issued shares at almost par levels.

Those hurting from the IPO of Reliance Power would be hoping that such better sense and humility prevails upon its promoters too. The group company, Reliance Infratel has been sitting on its SEBI nod for the IPO for a very long time now. After the bitter experience of Reliance Power, for both the promoters as well as the investors, maybe the 'timing' and the 'pricing' of the issue is never right.

Maybe the issue of Future Ventures, the pricing of issue at par levels, will soon become the norm. If the issue does manage to do well, it might teach a few lessons to the 'aggressive' promoters. Actually, the PSUs were faster in learning this lesson. The FPO of Electrosteel was priced almost at par levels and all the other FPOs too, have been priced in such a way that it always left back something on the table for the investors to earn.

The primary market depends on the secondary markets. But if the latter continues to remain down for longer periods of time, will that mean that no IPOs will come for lack of 'good timing'? A bearish market means no aggressive pricing. So will promoters continue to wait indefinitely, jeopardising their projects, ostensibly for which they are raising money via the IPOs?

Sooner than later, we are sure to see more and more IPOs scaling down their prices. That's probably the singular, biggest advantage of an uncertain bearish secondary market. In these times of inflation, it's heartening to see the price of at least something come down!

Food for thought: The proud man will learn humility but will be proud of it too!