| . | While the stock indices appear to be vibrant and responding to developments in the socio-economic environment in the country, realization seems to be now dawning on the regulators that a market without the participation of retail investors is like a political party without a public support base. It is like leaders who can switch their loyalties overnight from Sonia Gandhi to Vajapayee without any qualms. It is perhaps such a realization that has prompted SEBI to bring in special relaxation for IPO s of IT, telecom and media companies. One of the main relaxations is that it is no longer necessary that a minimum of 25 % of equity be issued to public in the initial IPO. Similarly the condition that a debt instrument cannot be listed if the equity is unlisted has also been withdrawn. The talk of relaxation for IPO s should normally be music to the ears of investors who had made fortunes with public issues in the pre-SEBI days, when they could invest at Rs 10. But as usual the regulators seem to have little understanding of the market dynamics or little concern for small investors. Compare the current rule with the earlier days when a minimum of 60 % of equity of a listed company had to be made to the public. This encouraged distribution of wealth to the public and ensured that a "Public" company was indeed public in ownership also. The current relaxation may only encourage more private companies to call themselves "listed companies" and issue shares at a premium to the general public after a few months of manipulated trading in the market. The current relaxation will therefore be another blow to the investment opportunities of small investors in the IPO s. It is ironic that these developments are taking place under the guise of protecting small investors and by SEBI, an organisation funded by the public. Not withstanding this disappointment, small investors were happy to see two companies which had made public issues earlier at par come up with excellent results during the week. One such company was Medicorp Technologies and the other was Himatsingka Seide, the Bangalore based exporter of silk fabrics. Himatsingka Seide is a 100% Export oriented unit manufacturing and exporting Silk fabrics, Premium Furnishings and Silk dress materials and has been a remarkable performer over the years. Even when the going was tough for most of the export-oriented companies, it came up with consistently good performances year after year. The shares are quoted around Rs 310 at present. During the year 1998, the company invested over Rs 75 crores in new spun silk manufacturing facilities and a weaving unit. It appears that the benefits of this investment have started accruing. In 1999 the turnover jumped to Rs 84.80 crores showing a 43 % rise. The net profits also went up by 17 %. This was the time when many export oriented units suffered erosion of sales and booked losses. Table: Himatsingka Seide-Growth in Sales.
During the first quarter of the current year, the company has shown further growth in turnover and profits. While the turnover rose by 22 % (in proportionate terms), net profits rose by about 11%. The company recently announced a 1:1 bonus for which October 1 is the record date. While the investors in the original public issue must be quite pleased with their gains, new investors can take a foothold in this company now for medium term gains. The company is in a niche market where competition is thin. International market situation indicates that importers are increasing their commitments to Indian exporters as against Chinese exporters. This should make the prospects of Himatsingka seide very stable. Spectacular gains may not be the nature of the scrip since the floating stock has been extremely low. Probably the bonus issue will increase the floating stock and bring in new buyers at lower price. This may improve the price–earning ratio of the scrip in the coming days. As a cumulative effect of these factors, 1999-2000 may give a nearly 50% appreciation for the new buyers. Na.Vijayashankar 24 th July 1999 | . |