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Tuesday, March 14, 2006

Pricing differences hold up Air Deccan IPO

Air Deccan will take a while longer to touch down on Dalal Street. Merchant banking sources say the initial public offering planned by the country’s first low-cost airline is likely to be delayed by a couple of months. The maiden issue, earlier expected at the end of this month, has been caught up in differences over pricing, reports The Economic Times.

There was no agreement on price at a meeting between lead managers to the issue and the promoters on Wednesday, sources said. A sub-committee formed by the airline - comprising Air Deccan officials and directors - is expected to meet in the next few days to take a final call on the matter.

Confirming that that there may be a delay in its IPO, G R Gopinath, Managing Director of Air Deccan, said some lead managers issue want the issue to be held back. “We had different views from our lead-managers. The board will decide soon,” he added. Sources said the promoters and merchant bankers could not agree on a price. Stock market volatility has also raised doubts if this was the best time for the issue to get off the block

The lead managers favouring a delay would like the IPO to be launched after two to three months. Enam Financial, JP Morgan India, ABN Amro Securities, ICICI Securities and SBI Capital are the lead-managers.

According to merchant banking sources, the ‘roaring’ success of some of the recent IPOs such as Inox Leisure and Entertainment Network (India) had raised the expectations of Air Deccan promoters. Inox’s issue was oversubscribed 62.25 times while that of Entertainment Network was oversold over 51 times.

“More than the fundamentals of companies, it is the performance of recent IPOs which are becoming the yardsticks,” a senior executive in a leading investment bank said.

Jet Airways’ IPO had become a bell-weather scrip for the aviation sector. About a year back, Jet Airways’ IPO had met with an overwhelming response, with the issue getting oversubscribed 4.4 times. The issue received a total 7.5 crore bids for the 1.72 crore shares on offer at a price band of Rs 950-1,125.

In recent times there has been a reverse in trend of opening boom in newly listed scrips. Companies like GVK Power & Infrastructure and Jagran Prakashan, which have made their debut on the bourses last month on a high note, immediately slipped to the red, earning the ire of investors.

GVK Power shares opened at Rs 350 on the Bombay Stock Exchange (BSE), as against the issue price of Rs 310. It hit a high of Rs400 and a low of Rs 304.55.


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