As per the Sebi norms, a new scrip should get listed within eleven weeks of the issue closing. However, how prompt are our issuers? There were 66 new issues that hit the capital market in the first two months of this year. More than 90 days have elapsed since these companies closed their issues.

But, only 38 companies have so far found a place in the official quotation list. More than 42 per cent of the issues hit the market during the first two months of 1997 have already become dead investments with no trace of listing (see table).

Among them, Gujarat heads the list with nine issues, followed by Maharashtra with eight issues. Of the 28 issues that are yet to be listed or traded, as many as 24 issues face more than 100 days listing delay. Among the merchant bankers, Prudential Capital takes the credit for most of untraceable new issues. If issuers and their merchant bankers go into a slumber after collecting public money and with no action from the regulators, where would the investors go?

In the line with the general mood of the capital market, new listings counters also remained inactive with only two new issues entered the ring during the previous week. Both of the issues opened their account with a nominal premium over the issue price on the first day. However, in no time, they also went into oblivion.

Roses Floriculture could find a place in the quotation list only after 175 days since its closing. The company promised to plant rose bushes by April 1997. But, there is no smell of it. Floriculture industry in general has a pathetic record to speak about. Roses Floriculture is not only managed by inexperienced promoters, but the machinery suppliers are new to their line of business! With only 25 per cent of their stake under lock-in, the scrip was expected to face selling pressure on listing. Contrary to it, the price shot by 48 per cent in just four days of listing. It opened at Rs 10.50 on May 22 and closed at Rs 10.60. The next day, it opened at Rs 11 and closed at a higher level of Rs 12. On the third working day, the scrip opened at Rs 14 but closed slightly lower at Rs 13.60. On the fourth day, the scrip peaked to Rs 15.50. Since then, there has been no trading in this scrip. For an industry and a company which are still under `trial', an appreciation of 55 per cent over the issue price is a bonanza. But, who is the plucky buyer?

Dowell's Elektro Werke has promptly listed its shares within 10 weeks of closing its issue. But, it has failed to attract investors on listing. With a Rs 10-crore equity base, the scrip has so far recorded a volume of just 200 shares with a paltry value of Rs 2,390. Dowell's opened its account on May 28 at Rs 11.95 which was the first and last quote for the scrip.

Why the investors shunned Dowell's? For one, the company has a disproportionate equity to its asset base. As against its post-issue equity of Rs 10.93 crore, the company's gross block amounts to only around Rs 5 crore! In fact, by taking Dowell's public, the promoters have benefited a lot. The public company bought a `reconditioned' (second hand) machinery for Rs 2.36 crore from the promoters' partnership firm. Besides, the public company placed a total amount of Rs 2.90 crore with the promoters. The break up is as follows: lease deposit for land and buildings Rs 90 lakh, technical know-how fee Rs 1.8 crore, and franchise deposit for the trade mark, `Dowells' Rs 20 lakh.

As against the core promoters' reported contribution of Rs 5.13 crore towards the company's equity, they were taking away Rs 5.26 crore from the company!

Also, though the promoters' stake was put at over 73 per cent in the post-issue equity, only a mandatory 25 per cent was under lock-in which means that a substantial part of the promoters' holdings may find its way to the market, if the price were to rule above the offer price of Rs 10.

(Arranged by Investar -- The Aarthik News & Research Syndicate)

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.