Why ICICI Securities, Hindustan Aeronautics IPOs failed? Sebi Chief Ajay Tyagi explains

Amid some IPOs attracting tepid response, Sebi chief Ajay Tyagi on Wednesday said pricing could be an issue for such trends. Responding to a question about certain IPOs not doing well in the last few weeks, Tyagi said, "I think pricing is one issue. And if they are not doing valuation properly and failing there is nothing we can do."

ICICI Securities on Monday reduced the size of its initial public offer after the sale elicited a sluggish response, especially from high networth individuals. The company had initially planned to sell shares worth Rs 4,017 crore through its IPO and had set a price band of Rs519-520 per share. Also, Hindustan Aeronautics' IPO was subscribed 99 per cent last week.

Other public sector firms that launched their IPOs in March also received low subscriptions. The IPOs of state-owned Mishra Dhatu Nigam (Midhani) and Bharat Dynamics were subscribed 1.21 times and 1.3 times, respectively.

Generally, IPOs have been attracting good response from investors. Despite rich valuations, Warburg Pincus-backed Lemon Tree Hotels witnessed an overall subscription of 119%, or 1.19 times On Wednesday, the last day of the share sale.  

The IPO to mop-up Rs 1,038.68 crore received bids for 15,48,77,925 shares against the total issue size of 12,98,35,580 shares, data available with the NSE showed. 

Equity market has seen correction so far this year, with the benchmarks Sensex and Nifty falling over 3 per cent year to date. The sluggish sentiment in the secondary market is why primary markets are also not doing well, say experts. 

Centrum Broking although expects the IPO market to remain healthy in FY19, but added the robustness in the primary market will depend on how the secondary market performs. It will also depend on political certainty and government disinvestment program, it said. 

Ajay Srivastava, MD, Dimensions Corporate Finance Services feels the valuations at which IPOs are being launched are not justified.  

"Most IPOs that are coming these days are being launched at expensive valuations. Promoters will have to understand they must leave at least 10-20 per cent gains for investors. I believe the IPO market will remain sour in 2018," he said.