IPO Failure : Samvardhana Motherson Finance Ltd issue closed today with just a shade over 23% subscription…BRLMs Standard Chartered Securities and J P Morgan India and Selling Shareholders decide not to proceed with the Issue

The Idea of this Blogpost is not to rub salt on the wounds but to again expose the twins Greed and Fear that characterize our markets …either the two BRLMs grossly overestimated their own ability or they grossly underestimated the intelligence of Investors or both !

IPO of Samvardhana Motherson Finance Issue closed today grossly undersubscribed...The Two Book Running Lead Managers Standard Chartered Securities (I) Ltd and J P Morgan India Pvt Ltd and the Selling Shareholders seeing this situation have decided this evening not to proceed with this Issueas if they had any choice in this matter,as even date extension would have not helped the issue succeed !

http://www.bseindia.com/xml-data/corpfiling/AttachHis/Samvardhana_Motherson_Finance_Ltd_040512.pdf

Of 127696518 Equity Shares available for subscription in the book building range of Rs 113 to Rs 118,only 29586650 shares were bid for as below….that’s just a shade over 23% subscription

Bid and Quantity for Samvardhana Motherson Finance Ltd

Cumulative (BSE+NSE)

Last updated on
Friday, May 04, 2012  5:15:00 PM
Price(Rs.) Cumulative Quantity
113.00     29586650    
114.00     27811400    
115.00     27810850    
116.00     15817050    
117.00     15816200    
118.00     15816100    
Cut-off     587250    

I’m assuming it was the BRLMs that guided the Company in the IPO Pricing Band of Rs 113 to Rs 118…..if so,they need to be pulled up by the Company for having mislead them for such a high Pricing Band,given the Market Sentiment prevailing ….Such Pricing left nothing on the table for Investors and was largely instrumental in the IPO not succeeding

A Good and Costly Lesson Learnt of the Consequences of  Mispricing IPOs in a Challenging Environment….Samvardhana Motherson Finance should have priced the IPO much lower  in the Rs 75 to Rs 80 band or else awaited better times if they were keen to launch the IPO at higher Pricing like they just unsuccessfully did

When reviewing this Issue and the Prospectus I had found the Pricing high and was skeptical of the IPO sailing through,more so as it was a fairly big issue of over Rs 1500 crs …seems I was right….expect BRLMs to blame Sentiment and not the IPO Pricing for this Failure !

As for the Macro Picture,all those who have been in touch with me or following my blog in the recent past will have sensed why I was not excited and  why I thought 17000 Sensex will break on the downside like it did scaringly today…1.87% and 320 points down to 16831…The Month of May looks ominous for the Markets…so sell and go away in May as they say…take a vacation…if you can afford it though !