Friday, February 08, 2008

Names don’t mean much Mr.Khorakiwalla…

This is it. Wockhardt Hospitals backs off. A glowing moniker for investors’ shrunken appetite for IPOs. Emaar MGF is likely to follow suit if it fails to scrape through. The QIB portion of Wockhardt Hospitals IPO was subscribed just 6.44 per cent. The retail portion was subscribed to a far more respectable 51.92 per cent. Some reports reveal that the grey market premium for Reliance Power IPO has significantly declined.

I would leave the downturn in investors sentiment alone for now. What stuns me is that it has happened despite the impressive line up of high profile investment bankers by Wockhardt Hospitals – Citigroup and Kotak Investment Bank. Could they not secure even one time subscription by QIBs? How different are they from other not-so-high-profile I-Banks then? Why didn’t it devolve upon them if indeed they’ve underwritten it? Or have they? No clear answers yet.

As a corollary, can’t we safely imply the success of the issues lead managed by them has also been by default? I would lay it on boom time sentiments and certainly wouldn't attribute it to their subscription procurement skills. Talk of their famed connections and ability to secure huge subscriptions – their principal deal bagging levers.
A bird tells me India’s I-bankers are a cautious lot. Foreseeing IPOs that lay goose eggs, they do `soft’ underwriting only – responsible only if bidders fail to pay up on allotment. Smart as they are, they don’t do the `hard’ stuff – the kind that obligates them to make it good to the issuer on the unsubscribed portion of the IPO. So, if the IPO bombs without attracting bids, the I-Banker can go scot-free.

In short, the names don’t mean much. Mr.Habil Khorakiwalla, CEO of Wockhardt must be licking his wounds now – or busy returning subscription cheques to investors (within 15 days).

No comments: