Asian shares rose in the early trade as tensions in the Korean Peninsula eased and first-quarter earnings shone. Shares in Hong Kong are higher today as the Hang Seng gains 1.5%. Wall Street closed nearly flat on Friday as inflation worries and struggling technology and energy stocks were offset by an advance in the consumer discretionary sector led by Amazon.
Back home, India share markets opened the day on a strong note. The BSE Sensex is trading up by 197 points while the NSE Nifty is trading up by 27 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.5% respectively.
Barring oil & gas stocks, all sectoral indices have opened the day in green with information technology stocks and realty stocks witnessing maximum buying interest. The rupee is trading at 66.78 to the US$.
In the news from the IPO space. The primary market emerged as a money spinner for investors in 2017-18, with 65% of the newly listed companies trading well above their issue prices, giving returns of up to three times.
Out of 41 companies that made their debut in the past fiscal, 27 are trading above their issue prices fixed after their IPOs. The remaining 14 firms, however, have failed to attract investors and are quoting below their issue price.
These 27 firms have rewarded investors with returns in the range of 1%-325%, with six of them reaching over 100% till the last trading date (April 27).
Shankara Building Products, which made its market debut in April last year, has seen the steepest surge in its share price and is trading 325% higher than the issue price.
The initial share-sale offer of Apex Frozen Foods has given a return to the tune of 270% while Salasar Techno Engineering has rewarded investors with a return of 258%.
Others that have given impressive returns are CDSL, Dixon Technologies (India) Ltd, Bandhan Bank, Cochin Shipyard, Godrej Agrovet, Prataap Snacks as well as Security and Intelligence Services (India) Ltd.Besides, Astron Paper and Board Mills and PSP Projects have jumped about 174% each over their respective issue prices. Further, AU Small Finance Bank has rallied over 103% from its issue price.
It's not that all companies' prices have flared up unmindful of realities. There has been exuberance for some issues because they are truly high potential. Either they are from virgin sectors like insurance or from genuinely high growth consumer facing businesses.
In contrast, as many as 14 companies have failed to stay afloat as they are trading much below their respective issue prices.
S Chand has seen its shares plunge by 41%, while shares of General Insurance Corporation of India have fallen by 22% and The New India Assurance Company has shed about 17%.
Interestingly, public sector insurers -- General Insurance Corporation of India and The New India Assurance Companyhave been trading well below their respective issue prices, while the same has not been the case with private sector players.
Shares of HDFC Standard Life Insurance Company have been trading 79% above the issue price and those of ICICI Lombard General Insurance Company and SBI Life Insurance Company have risen by over 13% and 8%, respectively.
Meanwhile, the BSE's benchmark Sensex has climbed by over 10% in the last financial year and is currently hovering at close to 35,000 points.
IPOs Underperform Broad Market Indices
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In the fiscal gone by, a total of 45 companies came out with their initial public offers (IPOs) raising a record over Rs 820 billion. The previous high was in 2007-08, when companies mobilized more than Rs 410 billion through initial share-sales.
During such times, it is imperative to be critically selective when investing in IPOs. Carefully analyse each company for its own merits and don't give in to the hype surrounding the public offering.
That's Ankit Shah's approach at Equitymaster Insider. He keeps an eagle-eye on the developments in the IPO space and updates his readers on the big-ticket IPOs.
Ankit and his team of researchers constantly reference this handbook on investing in IPOs. You can download a copy for yourself. It is free. Just click here.
Moving on to the news from telecom sector. Idea Cellular posted a consolidated net loss of Rs 9.6 billion for the fourth-quarter ended 31 March 2018, a near three-fold rise from Rs 3.3 billion posted for the same period a year ago.
The company cited the financial stress in the telecom sector, including aggressive price plans, fall in termination charges and low priced plans offered by new 4G operator as reasons.
The company's total income fell to Rs 63.9 billion during the quarter under review, from Rs 81.9 billion recorded during the same period a year ago. On a standalone basis, the Aditya Birla Group company's net loss stood at Rs 10.2 billion on a total revenue of Rs 61.4 billion.
One shall note that, the Indian mobile industry witnessed another year of hyper-competition as well as high regulatory headwinds. The super aggressive price plans including the deep discounted unlimited voice bundled data plans, offered by most of the incumbent operators to retain existing subscribers against abysmally low priced plans offered by new 4G operator, exploded the e-voice and data volume growth multi-folds.
But this led to a sharp decline in consumer average revenue per user (ARPU) resulting in industry Adjusted Gross Revenue (AGR) falling by nearly Rs 322 billion at 21.7% (CY17 vs CY16).
Idea had the lowest drop in AGR Revenue Market Share from 20% in CY16 to 19.5% in CY17 among the top three industry operators in spite of major gains by new 4G operator.
During the year, the dual negative factors of steep reduction in domestic and international mobile termination charge settlement rate and unrelenting rate pressure on voice and mobile data services as high ARPU consumers migrate to lower priced 'unlimited voice bundled data plans' resulted in 20.5% decline in Idea's gross revenue in FY18 to Rs 282.8 billion.
The company remains cautiously optimistic on India growth story and continues to expand its scale of operations, this tumultuous phase impacted Idea's EBITDA during the current financial year by 41% to Rs 60.5 billion.
Idea Cellular share price opened the day up by 1.5%.
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