Till about last month, I used to believe that one of the best ways to gauge the quality of an IPO (offered price, expected listing gains and future prospects) was to see the subscription pattern on the penultimate day.. good issues will see huge response from the QIB/FII/MF while bad ones would be shunned.
Also issues with good management would see good response from the employees and IPOs with good long term prospectus would receive bids from Non Institutional investors.
So my strategy in any IPO was
1) To do fundamental research about the future prospects.
2) read the broker’s advice.
3) see the market response.
if 2 out of these 3 parameters gave me a positive response, I would go ahead, (and since I a advice to a lot of my friends that means an investment of atleast 10L) else I would wait and watch for the next IPO to come. In the past 2 years, this time tested strategy has never failed me (except when I got pure unlucky and the issue was so much over subscribed that I got my full 1L refund)
However this strategy seems to be failing in recent days.
I felt CCCL (consolidated construction company ltd) was a good company to invest in, but most of the brokers seem to advise me against it (they cited the fact that it is aggressively priced, and the intentions of promoter is dubious… only recently he issued himself a large number of shares at a throw away price of 10/- per share… then the company pays its parent holding company a sum of 20 million INR p.a. for the royalty on the trade mark.. etc. etc.) also till the penultimate day, the issue was barely subscribed.
Since 2 of the 3 parameters were against me, I gave it a pass… just to realize that all the bids came on the last day… CCCL saw more bids then Koutons (which was a darling of the investors)
So clearly, I need to develop an alternate strategy…. what is your strategy for IPOs?
Ankur Aggarwal
sree
Sandip Chaudhuri
vbr
shobhendrasrivastava
