IPOs are coming back

January 2008 was a memorable month. It was when the bull market rally finally caved in. It was also when the much touted Reliance Power IPO came out and failed to live up to the huge expectations of investors. Now that the markets have left their lows far behind, the IPOs are back. As per a leading business daily, Anil Ambani plans to come out with another huge IPO of about Rs 40 bn in about two months. This time around, he plans to sell around 10% of Reliance Infratel (RITL) - the tower company that owns most of Reliance Communications' tangible assets. While the draft prospectus is yet to be filed, the strength of the company's business model (dependence on parent) and the valuations remain to be seen.

While IPOs serve a very important purpose of mobilizing savings and raising capital for companies, they are aggressively marketed and tend to come when markets are buoyant. Of course, it would be foolish to have a negative opinion on all IPOs on a blanket basis. However, in our opinion, it would be prudent for long term investors to remember the saying, 'caveat emptor' – let the buyer beware.