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Sunday, Oct 10, 2010
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Home Page - IPOs
Markets - Foreign Institutional Investors

Foreign investors buy into IPOs eyeing listing gains




Domestic institutions such as SBI, SBI Life Insurance follow suit.










K. S. Badri Narayanan

Chennai, Oct. 9

Retail investors are not the only ones with an eye on ultra short-term gains when subscribing to initial public offerings.

Foreign institutional investors, often considered to be investing with a long-term perspective, have also been offloading shares on listing day.

Since August, shares of 13 companies have been listed. Many of them, such as Prakash Steelage, Indosolar, Orient Green Power and Microsec Financial Services, saw some heavy offloading by FIIs, according to data on bulk deals furnished by stock exchanges.

The FIIs acquired these stocks through IPO allotment is clear from the fact that their names did not figure in the offer document under the shareholding pattern.

Aggressive pricing

According to analysts, aggressive pricing of an IPO is one of the reasons for investors booking profits on Day 1 itself.

Mr Arun Kejriwal of KRIS Securities said the volume of stocks delivered for transfer indicates that they account for 60 per cent of the total outstanding shares. This, in his view, indicates FII offloading.

“As the non-QIB (qualified institutional buyer) portion cannot exceed 40 per cent (in an IPO), it is obvious that the selling is coming from big institutional investors.”

Mr Jagannadham Thunuguntla of SMC Securities said, “They are flipping the (IPO) stocks instead of investing. As no one knows how long this current trend will sustain, they are making listing gains before a rough patch re-emerges in the equity market.”

According to Mr Kejriwal, “There are some big institutions which sell these shares in the first five minutes of trading itself,”.

Foreign institutional investors that sold shares include Goldman Sachs (in Orient Green Power), Citigroup Global Markets (in Indosolar), Merrill Lynch (in Microsec) and Credit Suisse (in Tirupati Inks, Microsec Finance, Indosolar, and Gujarat Pipavav).

Most of the selling by foreign institutional investors was through Mauritian investment accounts. However, domestic institutions too have not been quiet. State Bank of India and SBI Life Insurance sold shares of Gujarat Pipavav Port Ltd on the listing day itself.

FIIs are seen as being largely responsible for the current stock market rally that propelled the BSE Sensex to around 21,000.

badri@thehindu.co.in







Related Stories:
30% FII funds flow into primary markets
IPO performance dampens the inflows

More Stories on : IPOs Foreign Institutional Investors


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