Public Sector Undertakings have almost always been excellent investment opportunities. The Initial Public Offerings (IPOs) of NTPC, Power Finance Corp and Rural Electrification Corp have created immense wealth for investors in the past years.
These firms generated better returns than their private counterparts in those times and also allured investors with 5% retail discounts.
Many big-ticket IPO/FPOs are waiting to hit the hit the capital markets, ONGC and SAIL the prominent ones in the list. These offerings have been delayed due to turmoil in the Indian markets backed by the issues emanating from the U.S and EU Zone. If newsmakers have to be believed, ONGC FPO is supposed to hit the market in Sep-2011 and SAIL in this fiscal year.
Following is the list of public sector offerings that hit the capital markets in the last 2 years. The data also throws some light on grading’s, subscription in retail category. Additionally, data also has a mention of overall subscription status of these offerings.
The list comprises of total 15 PSU offerings in the last 2 years. Out of these, 8 are Initial Public Offerings and others being Follow-On Public Offerings. This list includes the biggies like Coal India IPO and gargantuan FPOs of NMDC, NTPC, Power Grid and PFC.
As can be seen, all the PSU IPOs in the list are graded 3 (Average Fundamentals) to 5 (Strong Fundamentals). All these 15 offerings collected 63635.56 crores, Coal India leading the pack at 15199.94 Crores.
Performance of PSU offerings:
Source : BSE Data
The data in the above list analyzes the listing date performance of the public offerings and as on date absolute returns of the same.
Listing Day Performance:
Coal India which had a marvelous listing emerged out to be a clear winner in the pack with 39.73% returns. The next in line is MOIL which generated 24.40% returns on its debut. REC FPO which hit the market in Feb-10 generated 19.14% returns on its listing day.
5 out of 15 issues plunged in red on listing days on closing basis with PTC India Financial suffering the most, almost to the tune of 11% drop from its issue price. The rest in the lot, posted meager to decent returns in the range of 1-10%.
However, the losses in PSU offerings are less in comparison to the private players which may be very volatile in terms of returns. Still in a broader sense, it is still discomforting for the investors to see the public offerings slipping in red vis-à-vis its issue price on the first day itself.
As on Date Performance:
As on date, 11 out of 15 stocks have plunged in red in comparison to respective issue prices. PTC India Financial Services have suffered the most with almost 41% drop below its issue price. Shipping Corp – FPO and Punjab & Sind Bank – IPO are next in line with 38.64% and 37.67% drop respectively.
Coal India, yet again, tops the pack with 53.04%. The others which managed to show up in green are Power Grid, United Bank and Oil India.
MOIL which made its listing debut at 551, ended the listing day at 466.5 with gains of 24.40% from its issue price is now quoting at 302.05, a loss of 19.45% vis-à-vis its issue price. It has witnessed a slump of almost 45% from the listing day high.
Oil India has been at the other extreme, which managed to improvise its listing day performance to put up a better show, as on date. Oil India debuted at 1019.00, ended the listing day at 1140.55 and currently quotes at 1300. It has been witnessing an upsurge unlike MOIL which faced a continuous downfall.
Power Grid, Coal India and United Bank are few others in the list which resembled Oil India and gained on their listing date performance to put up a good show, as on date. Apart from these 4, all others have witnessed a downfall when their listing day performance is compared with their as on date performance.
Looking at the broader context, all this happened with a sharp downslide in the secondary market because of uncertainties in the global economy. But still analyzing this pack, the PSU offerings have also witnessed huge volatility in terms of returns and that too in a short span of time. This kind of volatility is more attributed to non-PSU offerings and that too with lower ratings.
This raises some questions on pricing aspect of the issues w.r.t the financial strength of the company. Additionally, it also questions the grading’s assigned to the some of the new kids on the block.
These are few points which require a great deal of thought. This is so because if there is nothing or very little left on the table for a retail investor, he would like to look for better investment alternatives. All this can be harmful in the context, especially when the government is looking for the means to increase the retail participation both in primary and secondary markets.
