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
Skabeesh
shobhendrasrivastava
I think lots of hype & gamble involved in IPO.. and sometimes genuine fundamental research fails… I would always go with market response.. I mean watch subscription rate on first two days and If it’s getting over subscribed then better I blindly invest.. It usually works for me.
Note: I am usually a short-time investor.
If I have to invest long-term then I usually evaluate company by seeing comments & reports from “Good” Non Institutional investors who gonna seriously invest.. I usually contact my friends who are working in those Non Institutional investor’s companies.. he he
Comment by B Chopra — September 22, 2007 @ 1:55 pm
i agree that subscription numbers r the best indicators… but recent few months I have been seeing that almost all the subscription is made on the last day…. so our best meter is faulty
Comment by Ankur Aggarwal — September 22, 2007 @ 7:34 pm
last day is when to invest
cause i can get lazy and leave the research to u …
see the figures and then decide thats my plan
plus ur opinions do help
Comment by Prax — September 23, 2007 @ 12:53 am
plus indian markets arnt invested in by lower middle classes yet so there is no depth or political will
to deal with the systemic rot that surfaces once in a while
IPO mkts are still satta bazaar to an extent
Comment by Prax — September 23, 2007 @ 12:55 am
lastly oversubscription does not mean good co
they can be short term plays or hot papads !
Comment by Prax — September 23, 2007 @ 12:56 am
//plus ur opinions do help
cause i can get lazy and leave the research to u …//
its high time i should start charging for it.
//IPO mkts are still satta bazaar to an extent//
i agree to that but even thought a quarter of the IPOs list below the issue price… in the past 2 years only one of the IPO i invested in listed below issue price… asian granite…. but it recovered immediately with a 10% listing gain (not bad since i got 50% allotment)
so a slight screening always help
Comment by Ankur Aggarwal — September 23, 2007 @ 1:29 am
btw do u think the IPO ratings r any good… i tried reading it for the last couple of IPOs but i found even the scantiest of the broker published a more detailed report.
Comment by Ankur Aggarwal — September 23, 2007 @ 1:30 am
ipo ratings are popes preachings
to be read but not trusted..
one must be personally responsible
charges eeeh
why dont we start a recos website
wordpress doesnt even allow adds
Comment by prax — September 23, 2007 @ 2:29 pm
deccan aviation open offer
The offer price of Rs.155 is at a 8.3 per cent premium to the stock’s current market price
wat say u
Comment by prax — September 23, 2007 @ 2:38 pm
i bought it at 133 http://enagar.com/2007/06/11/air-deccan/ and my money… however i won’t recommend you to go for the open offer because only a portion of the shares would be bought in the offer and you might incur a loss in the remaining shares…
plus open offer is outside the exchange so u pay a normal 33% IT on it.
//ipo ratings are popes preachings//
i totally agree… and it has not made much sense for me till now.
//charges eeeh
//
u ungrateful parasite…. grrrrrrrr…..
//why dont we start a recos website
for the benefit of the viewers of ENagar… after all every citizen needs to earn his/her own bread.
wordpress doesnt even allow adds//
there r 2 problems in it… firstly i do investment and not trading.. so i cannot guarantee more than an article every fortnight… which most of the stocks website rely on daily trading calls…
neways if i truly think a deal is low risk and has decent returns.. i post it for free
Comment by Ankur Aggarwal — September 23, 2007 @ 2:58 pm
ungreatful ehh
who gives so many comments on ur blog and increases ur stats??
Comment by prax — September 23, 2007 @ 10:30 pm
he just kidding man.. my advice is not that professional that i can charge for it..
and ur views r always welcome.. infact i learn a lot from them
Comment by Ankur Aggarwal — September 24, 2007 @ 9:44 am
Comment by Prax — September 24, 2007 @ 12:20 pm