Rout in IPOs: Newly-listed companies including Brooks Labs, SRS, L&T Finance, Tree House, TD Power Systems and PG Electroplast lose up to three-fourths of value

MUMBAI: Recent rout in IPOs will daunt retail investors from upcoming share sales, as investor associations smell foul play by promoters and merchant bankers that led to over-the-top pricing of some of the new listings.

Companies that have listed recently on stock exchanges had up to three-fourth of their value eroded in less than two months. Of the five companies that listed on the exchanges since August, three are trading 6-75% lower than their offer prices. The benchmark share index Sensex has declined 10% during the period.

All these six stocks have seen unnaturally high price spikes on their first few day after listing, a sign of manipulation by investment bankers, brokers said. The companies have raised a total of 1,970 crore through share sales.

"Wrong pricing has given bad name to the IPO market. Fresh money from retail investors will stop coming. Gross responsibility rests with i-bankers," said GS Sood, head of Society for Consumers' and Investors' Protection. I-bankers have made a gross misuse of the free price regime to price share sales aggressively despite a weak market to lure company officials, he said.

  Over-a-dozen IPOs have been introduced in the past few months. Most have failed expectations, trading below their offer prices. Anchor investor allocation, too, has failed to raise confidence among retail investors.

Other Asian IPOs, too, have taken the hit. In HK, many companies are either deferring or canceling share sale plans, and many approved IPOs are postponing market entry.

"Investors are not keen on IPOs nowadays as there have been very few IPOs and their performance has not been good at all," said MS Apte, head of Lokmanya Seva Sangh, an investor association based in Mumbai. Companies that listed on the stock exchanges since August include Brooks Labs, cinema halls-to-retail chain owner SRS, L&T Finance, Tree House, TD Power Systems and PG Electrop

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