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UPDATE 2-Indiabulls Power skids in latest poor IPO debut
October 30, 2009 / 12:17 PM / 8 years ago

UPDATE 2-Indiabulls Power skids in latest poor IPO debut

* Sharp slump on debut could dampen IPO pipeline

* Analysts seek more reasonable pricing

* Trade voice caution on IPO investment (Recasts; adds analyst comments, details, background)

By Pratish Narayanan and Narayanan Somasundaram

MUMBAI, Oct 30 (Reuters) - Utility Indiabulls Power INDP.BO slumped as much as 22 percent on its debut after raising about $380 million in a heavily subscribed IPO, which is likely to dampen investor interest in a long and growing IPO pipeline.

The poor debut for Indiabulls Power, a unit of Indiabulls Real Estate (INRL.BO) that counts billionaire L.N. Mittal as an investor, came on the same day that power company Sterlite Energy, a unit of Sterlite Industries STRL.BO, filed papers for an IPO to raise 51 billion rupees ($1.1 billion).

It also follows tepid openings by Adani Power (ADAN.BO) and NHPC (NHPC.BO) in recent months.

“Pricing needs to loosen up,” said Ajay Parmar, head of institutional equities at Emkay Global Financial Services.

“It’s up to companies and investment bankers to provide investors with valuations that are more reasonable,” he said.

Retail investors, who are allotted 30 percent of Indian IPOs, have shown less enthusiasm than institutions in recent listings, which bankers said may compel issuers to price their offerings more attractively and for investors to lower expectations. [ID:nBOM244087]

Indiabulls Power priced its offering at 45 rupees -- or 71 times earnings in the year that ended in March, at the top end of the indicated band. The stock closed at 39.25 rupees, down 12.8 percent in an overall market that fell about 1 percent.

It was the worst debut by an Indian firm this year, barring the small IPO by Euro Multivision, which dropped 30 percent after raising 660 million rupees.

“Buyers are hurt, have a negative frame of mind as listings so far are far from attractive. I would not recommend them to invest in IPOs,” said Chetan Bhatt, a trader at Pragya Securities.

Investor appetite in Asia is cooling for IPOs after some firms traded poorly on listing, including Glorious Property (0845.HK), which fell 23 percent on its Hong Kong debut this month. Another Chinese property firm, Excellence Real Estate Group Ltd (1028.HK), shelved plans for a $1 billion Hong Kong IPO this week.

Still, at least 20 mid- to large-sized Indian companies are planning initial public offerings in the coming months. For a list of planned Indian IPOs, see [ID:nBOM492635].

Indian firms have raised $17 billion in share sales so far this year and a clutch of firms have filed regulatory applications to raise more than $10 billion as they aim to cash in on a stock market rally that has seen the benchmark index .BSESN rise around 70 percent. (Additional reporting by Manoj Dharra; Editing by Tony Munroe and John Mair)

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