Browns Investments bites the dust too!

Wednesday, 27 July 2011 00:42 -     - {{hitsCtrl.values.hits}}

New debutant diversified holding Browns Investments Ltd., (BIL) yesterday became the second stock to close lower from its IPO price.

Marking its maiden trading on the Diri Savi Board of the Colombo Stock Exchange, Browns Investments saw 74.7 million of its shares change hands via 4,036 trades generating a turnover of Rs. 374.3 million, highest for the day. The price peaked to a high of Rs. 5.30 before closing at Rs. 4.80, down by 20 cents.  

Softlogic Holdings was the first stock in recent years to close on its debut below IPO price. On 12 July it closed at Rs. 18.10, down by Rs. 10.90 as opposed to offer price of Rs. 29.

First off the block for Browns Investments yesterday was 783,600 shares executed at Rs. 5.10 each via 416 trades. Thereafter 1.34 million shares were done at Rs. 5.20 each via 183 trades followed by 2,000 shares at Rs. 5.30 via just two trades. Overall only 11,000 shares traded at peak price of Rs. 5.30 including some small blocks like 200 shares.

Via its IPO Browns Investments made available 50 million shares at Rs. 5 each, the same price as it did the Rs. 4 billion private placement.

The quantity traded yesterday amounted to over 50% of the offered volume via IPO but constituted only 4% of the number of shares in issue.

Whilst BIL hitting Rs. 5.30 in early morning trade raised hopes for investors but it finished the debut 20 below IPO price has only made prospects for slate of new IPOs bleak. Unlike Softlogic, there was no change in private placement and IPO price. Browns Investments IPO was oversubscribed by 5.3 times.

“Most of the retailers who took part in the IPO as well as a few others who came into the private placement are likely to have sold out,” analysts added.

They said why people sold out at Rs. 5 and below could be to have cash and avert further losses.

“The market of late has been highly suspicious of any gain in stock prices. Buyers behave as if prices will continue to fall,” analysts added. Others said that BIL performance was commendable given the mood of the market whilst most investors sold out of panic as well.

Lanka Securities said the counter (BIL) depicted another unsuccessful IPO debut with notable price depreciation.

Arrenga Capital said BIL saw selling pressure rising with several mid-sized blocks coming up for sale.

Browns Investments is a diversified company with interests in leisure, plantations, manufacturing, construction, cable manufacturing, agriculture and hydro power generation. It has plans to further expand in leisure as well as enter real estate.

The Rs. 250 million IPO attracted 17,501 applications requesting for 266.6 million shares worth Rs. 1.33 billion. There were 17,476 applications via bank draft and cheques requesting for 94.24 million shares worth Rs. 471.2 million whilst applications via bank guarantees were 25 requesting for 172.4 million shares worth Rs. 862 million. Proceeds from the IPO will be used to finance a new 150 room Samudra Beach Hotel in Kosgoda via subsidiary Samudra Beach Resorts Ltd.