Call for caution
Vaswani Industries, saw some investors from Gujarat making complaints about the basis of allotment to Securities and Exchange Board of India (SEBI) and saw the listing being stalled. This issue throws up some interesting thoughts on how small cap and midcap IPOs are subscribed. There is an active grey market active in such shares and an informal buyback is also in place. Issues, which receive zero or are undersubscribed by Qualified Institutional Bidders(QIBs) see huge subscription from HNIs (High Networth Individuals) and retail investors.
The people who invest in such issues sell on day one. In the past one finds that between 65-85 per cent of the IPO size changes hands on day of listing. Vaswani Industries was no exception and saw subscription from retail and HNIs. There was some withdrawals and the allotment per applicant increased which is reason for discomfort.