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Action hots up in IPO-bound companies

This article was posted on Jun 13, 2009 and is filed under Stock News

MUMBAI: The buoyant sentiment in the secondary market is having a rub-off effect on the activity in unlisted stocks. Oil India, BSE, Orissa Mineral, DSE, Sistema Shyam Tele are some such stocks, which are seeing renewed trading interest.

Most of these are IPO-bound companies, whose plans were stalled by comatose market conditions. Some of them delisted voluntarily, while some others were suspended by the stock exchanges.

The country’s second biggest state-run oil explorer Oil India, which is expected to come out with an IPO shortly, is seeing action in the unlisted market, say brokers. Most of these sellers are the ex-employees of Oil India who want to cash out on the boom without waiting to exit through the IPO. Sebi has already approved OIL India’s IPO, and the approval is valid till September 10.

Rajan Shah, director of 3A Capital Services, says there are some long-term investors and bargain hunters who are always on the look out for opportunities in the market. “As the trading volumes in the secondary market rise, the market for unquoted shares is attracting interest. We are witnessing a lot of activity in shares of BSE, Oil India, and Orissa Mineral among others,” he says.

Brokers familiar with the development say many long-term shareholders still holding shares of delisted or suspended companies want to exit mostly due to a sudden need for funds. The sharp rise in the markets has provided them the much-awaited opportunity to do so. For instance, in case of BSE, the stock has been rising with every surge in Sensex. When the Sensex was at 8000, the shares of Asia’s oldest bourse had changed hands at Rs 190.
Currently, it is being traded at around Rs 270. Mr Shah says around 2,000-5,000 shares change hands on a daily basis, but there are also bulk deals of 10-20,000 shares few times a month. Informed investors accumulate shares of these companies, some of which they feel are trading at a discount to their intrinsic worth.

They would take advantage of market once the primary market rebounds as many companies are expected to be listed once that happens.

In case of Orissa Mineral, a sizeable chunk of shares are held by some large investors. Brokers say there is activity in the stock even though the company has no plans of an IPO any time soon. Action also seems to be hotting up in the shares of Bharati Telecom, which holds around 45% in the listed entity — Bharti Airtel. Interestingly, there is also some activity in Bharat Hotels, which was delisted from bourses several years ago.

Many shareholders held on to the shares on talk that the company may go public again shortly.

source: Economictimes

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