Fair Value seen at Rs.53. The offer is unlikely to provide attractive returns to investors. The IPO does seem stiffly priced. Therefore, carries risk. Valuation looks to be unjustified, issue price is not cheap.
Benefits of the expansion out of the money raised would be available only in 2HFY11. Investors can give the IPO a miss.
Being a small-size issue, IPO Market Scam cannot be ruled-out in this script.
In this bull-market IPO pricing is unjustified for small investors, retired persons and others with limited means of income. However, even in my wildest dreams, I could not have imagined the nightmare that was to unfold in PSU dis-investment. The IPO market price manipulation has come as a bolt from the blue for millions of investors throughout the country. Thousands of small investors have lost a major part of their hard-earned savings as a result of this scam in Indiabulls Power, NHPC and many other small issues.
Who is to blame?
The game of passing the buck has been in full swing with every regulator claiming that it has been discharging its duty and that the blame lies elsewhere. At the outset, it needs to be understood that the stock markets are subject to violent fluctuations at times with wide swings in stock prices. That is why it is said that the weak-hearted should keep away from such markets. In other words, fluctuations in prices due to normal market operations are an accepted fact of life of investors and brokers alike. However, what is not acceptable is price manipulation, insider trading, misuse of office, etc.
It is the job of the regulator to ensure that any malpractice by any of the market players does not take place and no undue advantage is allowed to anybody. The regulator is expected to play a pro-active role in the market and not merely conduct post-mortems after the damage is done. Unfortunately, more often than not, the regulators act like policemen in Hindi films as they invariably reach the scene of the crime a bit too late. The situation will not be different this time as well.
Role of investors
Can anybody deny the role played by investors themselves? After all, how is it that, every few years, there is a scam and several investors become victims of such scams? Not all investors are really ignorant about the huge risks involved in the stock markets. Greed for quick money is responsible for the consequences suffered by several investors. When investors believe the most illogical and impractical claims made by promoters, merchant bankers or IPOs or other persons, they are inviting serious trouble.
The way markets operate, even the best of experts, at times, find it difficult to make sense of the situation. So it becomes all the more difficult for an ordinary investor to venture into the stock market. The irony is that, when we go to the market to buy consumables like vegetables, we bargain for a few rupees. But when it comes to stocks, we are willing to part with thousands and lakhs without much enquiry and understanding.
I have mentioned earlier in the past that neither the promoters nor the market intermediaries are there to help investors earn money in the market. They all fend for themselves and if some investors do make money in the process, it is purely incidental. Hence, it is only the investor who can save himself from future disasters. One should remember that even the so-called Investor Grievances Organisations have their own agenda to serve.
Role of Investor Organisations
Barring a few honourable exceptions, organisations which profess that they protect the interests of investors / shareholders, exist only on paper or serve the personal interests of promoters. Today, even politicians have entered this arena and their participation should be taken not with a pinch but with a large spoon of salt. Politicians are only interested in furthering their own agenda. Investors should be wary of such organisations and should not believe that these organisations will solve all their problems.
There can be no denying the fact that our country has become a country of scams. Every eight years there is a major scam involving crores of rupees and thousands of small investors. Apart from the lax regulators, one of the major reasons for such recurring scams is the extremely poor implementation of the penal laws. As a result, manipulators and scamsters have no fear of the law and are smug in the belief that, even if caught, they will be back in business in no time. Even after a decade, Harshad Mehta & Kethan Parekh's cases have reached nowhere. Such cases only encourage others to commit more of such crimes.
Hence, unless the enforcement of laws is strengthened and special courts are created for dispensing speedy justice and scamsters are made to forfeit all their gains, nothing much will change. This requires a strong political will among the powers-that-be.
Lastly, I once again repeat that only investors can protect their own interests and they should not be carried away by tall promises of quick gains. It will be worthwhile to remember the old saying: Those who don’t learn lessons from history are condemned to repeat the same. Better learn than suffer again.
Zerodha (Trading Account)
RHP
