Wockhardt Hosp, Emaar IPOs still overvalued: Tulsian

Wockhardt Hosp, Emaar IPOs still overvalued: Tulsian

Wockhardt Hospitals has revised its IPO price band to Rs 225-260 per share from Rs 280-310 per share. Similarly, Emaar MGF has also revised its price band lower to Rs 540-630 per share. SP Tulsian of sptulsian.com said the book running lead managers have admitted that the pricing has been aggressive and that is the reason why they have lowered it. “The element of inflationary valuation in fixing the price band existed in both these issues.” Excerpts from CNBC-TV18's exclusive interview with SP Tulsian: Q: How have you read what happened with Wockhardt Hosptials and Emaar MGF with both of them having to lower their price bands? A: The book running lead managers have admitted that the pricing had been aggressive and that is the reason why they lowered it. They may also want the price band to fall in line with market sentiment or have broad-based participation from retail investors. However, the element of inflationary valuation in fixing the price band existed in both these issues. If one looks at the revision, which has taken place to the extent of 16-20% in both cases, I do not think the reduction is adequate. In re-fixing the price band, the company doesn’t mind going for fixing or discovering the price at the lower end of the revised price band. Eventually, you may see a reduction of 25-30%. One has to wait for the market’s response and price discovery, which will finally take place in both the issues. If it happens at the lower end of the revised price band, then it is a 25% reduction from its original band. If you compare it with its peers, I still feel they are quite overvalued at those levels. Q: Would you buy a Wockhardt Hospitals at the lower end of the price band at Rs 225, Emaar MGF at Rs 540, and the recently listed Future Capital at around Rs 1,000? A: At the lower band of the re-fixed price band, Wockhardt Hospitals is giving me just the right valuations. There is no scope for further appreciation. It is not likely to get listed above that, so why take a risk. If I were compelled to invest, I would invest at the lower end of the re-fixed price band. I would not invest in Emaar MGF even at the lower price band, because it still looks quite stretched if you compare it with Unitech. Future Capital is yet to prove its performance in the financial field. It is still looking over stretched. When they went public, I felt that even at the upper price band of Rs 765 it was quite stretched. Now, everyone is taking a revised call on all financial stocks with regards to what their performance is. So, Future Capital’s price is linked to its overall financial performance. Hence, I won’t take a call on Future Capital. Q: At what price do you expect the Reliance Power IPO to list? What is your advice to those investors who have got the stock? A: Looking at the revival of sentiment in the secondary market, I feel it would probably get listed at a premium of Rs 150 over its issue price of Rs 450. So, it should list at about Rs 600. It is likely to get listed either on Friday or Monday. If it gets listed at around Rs 600, I see huge selling coming in from the HNI category because they are breaking even at Rs 145-150 levels. The HNI category had been subscribed 190 times but the final tally shows a subscription of 160 times. This means there was a withdrawal of 30 times from the HNI category. So, there will be selling pressure from that category. Since the retail category has received a discount of Rs 20, they may continue for sometime and remain invested in the issue. Overall, there will be selling pressure. Whatever price it gets listed, one would see the price softening by about Rs 50-75 from those levels, unless the whole quantity gets absorbed. Disclosures: I have no interest in any of the companies discussed.