The stock index is sinking. But, all the three new listings of the week command a premium over their issue prices! Who is pushing up the price? Only time will tell. A major surprise is Bank of India (BoI). The shares offered to public at Rs 45 each in February were listed at Rs 50.25 on May 5. On the same day, the scrip shot up to Rs 62 as against the closing price of Rs 60.70. BoI recorded a volume of 21.44 lakh shares in 2,847 deals. The next day, the price fluctuation narrowed. It moved between Rs 59.75 and Rs 62.25. Volumes crashed to 11.30 lakh shares in 1,723 trades. On May 7, the price once again firming up to Rs 66.75, while volumes soared to 27.23 lakh shares and the number of deals stood at 3,245. How long will the price hold? Looking at the track record, one can't bank too much on the scrip. For the 47,000 odd employees, who received easy credit from the bank to apply for the issue, the present price of Rs 66.75 is truly a `Boinanza'!

THREE-and-a-half years ago, in September 1993, the parent company Adam Comsoft painted a rosy future and effortlessly raised Rs 5.6 crore through a public issue. Early this year, the market value of the investment was less than Rs 4 crore. Undeterred, its subsidiary, the Mumbai-based Kolar Securities Services (KSSL) went public on February 13 1997, raising a bigger amount of Rs 6 crore at par. The issue was lead-managed by KJMC Financial. KSSL proposed to undertake financial activities like leasing, hire-purchase, corporate finance and broking. However, the largest funding plan was the investment in a subsidiary! Whereas the parent company, Adam Comsoft, invested Rs 4 crore in KSSL, the latter was pumping in Rs 2 crore in Kolar Sharex Pvt Ltd, the subsidiary.

They claimed that the promoters' stake in KSSL was 40 per cent. But, actually, almost the entire promoters' stake was contributed by Adam Comsoft, a public company, in which the promoters' holding was only the mandatory 25 per cent!

In other words, the individual promoters' had a paltry indirect stake of around 8 per cent in KSSL's equity of Rs 10 crore.

Future prospects: Being self-appraised, KSSL's offer document did not provide any clue. The track-record of the parent company, Adam Comsoft, was not a source of comfort either. Surprisingly, on 5 May 1997, on day 81 of the issue closing, KSSL opened its maiden account on the Bombat Stock Exchange, commanding a 20 per cent premium over the offer price of Rs 10 with a niggardly volume of 500 shares. On the next day, it did not find a buyer. May 7, the price fell to Rs 11.75. It is indeed amazing that an investment company with no creditable record to boot can command a premium even in the face of depressed market conditions.

NFL: Flowers could bloom

THE past few years has seen hordes of floriculture units tapping the capital market. Yet, not a single project has paid its dividend. The industry's dismal performance did not deter the promoters of the Hyderabad-based Nexgen Floritech Ltd (NFL) from taking the plunge. The company was in the primary market on February 3 1997 with a Rs 2.76-crore public offer at par. The issue was managed by the Mumbai-based Blue Blends Finance.

While many floriculture unit tied up with Dutch collaborators for technical assistance, NFL opted for a Mauritius company. The company's registered office was at Hyderabad, the project was located near Bangalore, but the issue managers were from Mumbai! The project land was not registered in the company's name even at the time of signing the offer document. It had not recruited people either. What's more, though the promoters'stake was pegged at 45 per cent (Rs 2.25 crore) in the post-issue equity of Rs 5.01 crore, the core promoters did not hold even 4 per cent in the pre-issue equity of Rs 1.43 crore!

With such poor commitment from the promoters, it was felt that NFL plan would never bloom. Setting at rest such fears, NFL, like NSSL, has surprised marketmen by finding a quote higher than its offer price. On May 6, the 82nd day after the issue closing, the company gained a listing at Hyderabad, its regional stock exchange. The listing has fetched NFL's Rs 10 bought share a premium of 12.5 per cent.

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

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.