It was a historical moment for SIB when its shares were listed on the bourses this week. But the stock traded dismally on NSE and BSE. On the Cochin Stock Exchange (CSE), SIB's regional exchange, no trade has been reported as yet after listing. As against the public offer price of Rs 32, SIB's maiden quote on NSE on December 14 was reported at Rs 25.25 before the scrip slid further to close its historical day of debut at Rs 23.25 apiece.

The slide continued unabated on the following days as well. On the second trading day, the stock opened at Rs 21.45 andended marginally lower at Rs 21.40. The third trading day saw the scrip piercing the Rs 20-mark to plumb the depths at Rs 19.70. Thus, in just three days of its historical sojourn at the bourses, new public investors lost over 38 per cent of their investment in the stock.

In terms of volume, while the opening day witnessed 21 trades at the counter with a volume of 2,900 shares, the second and third trading days clocked 9 trades for 1,800 shares and 19 trades for 5,500 shares, respectively. Though the average volume per trade has been on the increase, up from 138 shares on the first day to 289 shares on the third day, when analysed in the context of its large public holding and Rs 35.42-crore equity base, investors do not appear to be rushing with their sale orders.

On the BSE, too, a similar trading trend was witnessed when the SIB scrip opened for trading on December 17 with a muhurat quote of Rs 19, but ended the day at Rs 18. The volume recorded was also frugal with only 600 shares changing hands in 3trades. Readers may recall that in September this year, SIB had come out with a maiden public issue of 1.60 crore equity shares at a premium of Rs 22 a share.

Of the public offer, the regionally-focussed and largely NRI-patronised bank had reserved 22 lakh shares and 32 lakh shares for NRIs/OCBs/FIIs and financial institutions (FIs) /banks, respectively, besides reserving 16 lakh shares for its employees. The issue closed on October 3.

In spite of the depressing primary market conditions, SIB's maiden public foray attracted an over-subscription of 1.17 times. Its net public offer of 90 lakh shares received bids for 248 lakh shares. The quotas reserved for NRIs/OCBs/FIIs, employees and FIs/banks also recorded over-subscription of 0.82, 0.50 and 0.08 times, respectively.

A scrutiny of the basis of allotment of SIB reveals that the bank has managed to attract genuine subscription from investors. For instance, 57,879 investors applying for up to 1,000 shares in the public offer bid for 163 lakh sharescumulatively, giving the issue an over-subscription at this stage itself.

The 1,893 bulk applicants, each applying for over 1,000 shares and who sought 85 lakh shares among them, were, perhaps, the buffer to make sure the issue went through. Primary market success apart, SIB's secondary market debut has been a disaster so far. Some reasons for this can be traced to the bank itself.

The bank's offer document claimed that the bank did not have any identifiable promoters. Thus, even before its recent maiden public offer, SIB had a shareholder base of over 47,000 against an equity capital of Rs 19.79 crore. Leaving aside the top 10 shareholders dominated by ICICI and UTI, holding nearly 57 lakh shares, the rest of the shareholders held about 140 lakh shares among them. The average shareholding of the latter group thus amounted to less than 300 shares. That gave a distinct retail character to SIB's pre-issue equity base.

Here, it needs to be narrated that, in 1995 and 1998, SIB had resorted to a spree ofprivate placements of its equity with financial institutions so as to pre-empt any possible hostile takeover bid similar to the one faced by Catholic Syrian Bank. In between its private placement bout, SIB also made its only premium right issue at Rs 30 a share in February this year. Consequently, the equity base swelled from Rs 10.50 crore to Rs 19.79 crore pre-issue, and the cost of holding to most of the retail shareholders worked out to only Rs 14.62 a share. For those who did not exercise their rights, the cost at par worked out even cheaper! Naturally, some of them might be tempted to avail of the first exit opportunity offered by the SIB listing.

From an operational standpoint, SIB's fortunes over the last three years have fluctuated considerably. Between fiscal 1996 and fiscal 1998, the net profit moved up from Rs 4.62 crore to Rs 20.74 crore. This came about largely due to a corresponding fall in provisions and contingencies from Rs 32.96 crore to Rs 9.16 crore.

The bank has projected a grossprofit and net profit of Rs 50.10 crore and Rs 27.31 crore respectively for the current fiscal. Ambitious projections, indeed, if viewed against the nowhere-near-profitability levels achieved in the last five years that marked a spurt in its advances. Now with the economy in the vice-like grip of recession, the bank, like every other one, will have to contend with increasing NPAs in the near term. No doubt, these qualitative factors too will have a bearing on the SIB priceline on the bourses.

On the positive side, of course, SIB has consistently been on the dividend list. Over the last five fiscals, the payout has varied between 21 per cent and 28 per cent. On the current market price of about Rs 19, assuming that SIB maintains the last dividend of 28 per cent for fiscal 1999 too, the tax-free yield works out to 14.74 per cent. In the ruling climate, it is a much better yield than what can be achieved from comparable investment avenues. Therefore, some genuine buying interest might emerge in the counter ifthe SIB priceline goes down further.

Arranged by Investar -- The Aarthik News & Research Syndicate