Another Low Quality Indian IPO Jaypee Infratech falls 10% on Day of Listing

Most of the low quality IPOs that have listed in the Indian market recently, have fallen on the day of the listing itself.Jaypee Infratech which is supposed to be a mix of a infrastructure and real estate play is down 10% on the listing day despite listing itself at the lower end of the book building band.Tarapur Transformers is already down 30% and even a high quality offering SJVN which was supposed to do well and was priced conservatively has gone down by 4-5% .

Jaypee Infratech had very little interest despite hiring 9 investment banks to sell the issue . This proves that you can hire as many salesman as you like but if your product is bad it will ultimately fall in the market . How some talking heads on CNBC  were recommending this Company is beyond me. Jaypee Infratech belongs to the opaque real estate sector which is difficult if not impossble to value from publicly listed information.This is what I wrote some time ago in one of my articles about investing in the real estate sector in India

1) I have not found a single brokerage report from the “sophisticated” banks that give any decent way to value these companies . Most of them use NAVs which is a highly subjective number.I am 100% sure that none of the analysts would go out to the field to verify the value of the land that the company possesses.Standard metrics like P/E,P/B and P/S don’t seem to work here

2) Most of the companies are routinely raided by the tax and excise departments. Emaar,HDIL,Orbit and the list goes on an on . Not a big wonder since most of the deals in the real estate market are rumored to be done with black money.Now a foreign fund IREO joins the list .

3) Most companies have come out with IPOs in the last 3-4 years so don’t have a long operating history.Organized real estate is a recent phenomenon and most people will dispute that  “organized ” real estate is any better than the “unorganized” one. Real estate companies have such a bad service record and routinely break both the spirit and letter of the contract which is anyway loaded in favor of the companies.

4) Management seems confused as well.Unitech entered wireless and other segments,DLF entered into hotels,mall,multiplexes ,townships . Now both these companies want to spin off these entities to focus on real estate. With these 2 companies supposed to be the best , i wonder at the quality of the smaller ones.

Jaypee Infratech lists at discount on market weakness – Economic Times

The stock Friday opened at Rs 98 on the National Stock Exchange, against the issue price of Rs 102 per share. An hour into the session, the stock touched a low of Rs 90 versus a high of Rs 98.80. The share later traded at Rs 92.95, a discount of Rs 9.05 or 8.87%. Total traded quantity as at 10:02 am on NSE was 2,17,29,524 shares and turnover Rs 207.06 crore.

Set up as a special purpose vehicle for the Yamuna Expressway, Jaypee Infratech had raised Rs 2,250 crore from the initial public offering between April 29 and May 4. The 165 km, six-lane Yamuna Expressway will connect Noida and Agra, in Uttar Pradesh. The company currently has debt of Rs 4,044 crore.

Jaypee Infra had priced its IPO in the band of Rs 102-117 per share following lukewarm response, with retail investors getting a discount 5 per cent on allotment. The issue was subscribed 1.24 times, with 27.39 crore shares bid against 22.17 crore shares on offer.