Two-thirds of listed companies trading low

In contrast to handsome gains made in the primary market, nearly two-thirds of the 69 companies listed on bourses during 2010 are trading below their issue prices, resulting into negative returns for investors. An analysis of the BSE-listed companies shows that as many as 44 out of the 69 stocks are trading below their issue prices fixed after their initial public offers, according to a PTI report.

Seventy firms, comprising 59 private sector firms and 11 PSUs, came up with a public offer this year, raising Rs71,114 crores in total. Of these 11 issues, the Punjab & Sind bank is the latest entrant: it got listed on Thursday, and therefore has not been taken into account.

Meanwhile, a host of companies are rushing in to file their draft prospectus with the Securities and Exchange Board of India for launching their IPOs. Analysts believe that this is the right time for firms to raise funds through primary market because of a revival in the market after a lackluster 2009.

"After getting listed on the bourses many of the companies are unable to sustain their issue price levels, because of aggressive pricing. Besides, investors are still cautious and do not want to keep their funds invested in one place for a long-time and thus shuffle their portfolios after making some profits," Religare Securities Executive Vice President Head Research Retail Rajesh Jain said.

The total funds raised by the private sector through the 59 issues were worth Rs 21,100 crore. The current mark-to-market value of these issues is now Rs 17,600 crore. So the mark-to-market loss on these issues was about Rs 3,500 crore, indicating a 16.82 per cent loss.

In contrast, PSUs have given smart returns to investors. The public sector firms have garnered a whopping Rs49,500 crores in 2010 through 10 listed issues. The current mark-to-market value of these issues is about Rs54,000 crore and the mark-to-market profit on these issues was Rs4,500 crore, translating into a profit of 9.19 per cent.