Judging the IPO Investments

Tata Steel FPO Subscription has left some gain opportunity for those who invested. Looking at small premium and possibility of high over subscription, I decided to skip. However, the Retail category subscription of 1.6 Times and overall subscription of about 6 times means that if we had applied in full, meaning from all our 4 Accounts, we would get about 800 Shares. Looking at about Rs. 30 premium, there should be a Gross Profit of about Rs.24K and Net profit of about Rs.18K after considering cost of funds (7.75% in my case) and income tax. 3 of our accounts have ASBA so funds would earn 3.5% till the actual amount is debited from the bank. ASBA is helping. I am not looking at investing in Omkar Specility. The valuations @ 20 times look bit stretched. At this point in time, I would stay away from small size IPOs. I am not regretting my decision to skip Tata Steel FPO.

For me, IPO Investment is turning out to be judging the current state of market, looking at valuation & gray market premium, size of IPO, Investor enthusiasm and then deciding if the investment would be profitable.

Our Current Account for Loan Against Shares with ICICI Bank is ready with long term shares pledged. @ 13.5% its bit costly, but If we were to be needing more money for IPO investments, this would come handy, especially when two good IPOs come together. However, I don't see this happening for sometime in next few months given the state of stock market.

Regards, Rohit