Shares of digital cinema distribution network UFO Moviez India Ltd listed on a weak note on 14 May and have been under pressure. The stock listed at INR600 per share at NSE, marking a discount of 4% to the IPO price of INR625 per share. After the intraday volatility, the stock closed the day at INR597.3 apiece. The situation has not changed much over the next 45 days. We take 45 days as the yardstick timeframe as the pricing pressure eases after the 30-day lock on certain buyers gets lifted.
The IPO opened on 28 April and closed on 30 April with a total subscription of 1.76 times. The public issue, priced in the range of INR615-625 per share, was essentially an offer for sale (OFS) as all the 96 lakh shares were offered by existing investors including Sanjay Gaikwad, Narendra Hete, Apollo International, 3i Research, P5, Valuable Media Limited, and Valuable Technologies Limited. As a result, the company has not received any funds from the IPO.
In retrospect, this turned out to be a big negative as was the lower participation of retail investors. Despite the healthy oversubscription to the entire issue, subscription in the retail category was only slightly above 100%. This contrasts with 118.3% oversubscription to non-institutional investors (NIIs) and 4.56 times in the qualified institutional buyer (QIB) category.
Since a number of brokerage houses advised investors to give it a miss citing expensive valuations, it is not surprising to see that the shares have struggled to cross the IPO allotment price of INR625 per share. On the contrary, investors’ loss has only increased since listing as the stock has been going down and closed trade on 30 June at INR568.8 per share. This represents a loss of 9% from IPO rate.
It is worth highlighting that the bare minimum subscription in the retail category means that most investors received shares and thus, lost money in the IPO. The situation is not so grim for QIBs where oversubscription was higher. QIBs also have the financial muscle to withstand such tremors. On the other hand, such losses carry the risk of scaring away small investors permanently.
Despite the visible signs of a revival in India’s IPO market, the flurry of public issues so far this year have failed to reward IPO investors with an exception of Inox Wind ([stock_quote symbol=”INOXWIND” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]) and VRL Logistics ([stock_quote symbol=”VRLLOG” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]). This is largely due to management fixation of optimizing profits. In the attempt to extract the last penny out of market, promoters often leave even anchor investors high and dry.