I just came across an interesting article in MoneyLife, where Debashis Basu traces the ups and downs of the Indian stock markets – He states that during the boom in 1994-95, there were 1400 IPOs in a year! That sounds absolutely unbelievable now – considering 2007 was the big hit year with just 90 IPOs!
The gist of the article is reflected in this paragraph of the article:
“Of the 177 IPOs made in the past three years, only 68 are trading higher than their issue price. Of these, 24 are still showing a price appreciation of 100% or more (as of 21st August) while over 45 stocks are trading at less than half their issue price. Since we now know that investment bankers operate like a herd and are only focused on their fees, we need to ask if the regulator did enough to ensure strict accountability that goes beyond gathering due diligence certificates. The picture only gets worse. The regulator did precious little when investors were being ripped-off but media reports suggest that it was conducting a ponderous investigation that could lead to penalties after the market is all but dead.”
Gauri, it is not the job of the regulator to remove stupidity only to remove ignorance – ditto the merchant bankers. If people give sky high valuations to a utility where prices are fixed, and costs indeterminate, where the earliest cash flow is after 5 years and people bid way above the estimate of the merchant banks (estimated by the price band), I don’t see what heinous crime the merchant bankers have committed. These vague allegations would be appropriate in 1988 against the controller of capital issues – we’ve moved on to disclosure and anti-fraud remember? It’s not clear whether you are endorsing this opinion or not. If you are, I’m disappointed.
Sandeep Parekh
Sandeep – I’m not endorsing these opinions at all. I completely agree that it not the role of the regulator to ensure good valuations at all…
The primary reason I posted the article was coz of the statistics given therein.
Hope you’re well otherwise. Do let me know if you’re in Bangalore anytime!