Retail investors make good money in BEML FPO

After receiving huge response to its follow on public offering, Bharat Earth Movers (BEML) has listed that 46 lakh FPO shares on the bourses today. The company fixed issue price at Rs 1075 per share.

The share opened at Rs 1199, down 2% as against its previous close of Rs 1223.75 and touched a high/low of Rs 1230.05 and Rs 1171.05, respectively. The share closed at Rs 1196.60, up 2.39% over its close of Rs 1168.65 on July 3, 2007.

BEML had come out with an FPO of 46 lakh shares in the price band at Rs 1020-1090 and raised Rs 494.50 crore at the price of Rs 1075 per share. The issue had received overwhelming response, subscribed 30.65 times.

The reserved portion of QIBs received 63 times subscription. HNIs portion subscribed 6.4 times and retail - 2.6 times.

We have made a calculation on the kind of gains that an investor would have made while investing in the FPO. Though on the face of it the returns appear to be modest. In reality the annualized returns for the 15-day period during which the investor locks in his money is over 100%. So it seems investing in IPOs seem to be a much more profitable option for those looking at listing gains as against the modest returns his money earns by parking his money in bank savings and fixed deposits.

For example

If an investor invests Rs 98,100 in the issue by applying for 90 shares he would have been allotted only 33 shares (as per basis of allotment).The issue price is Rs 1075 per share. Today’s closing price is Rs 1196.6. It means that he would have gained Rs 4,012.8. ((Rs 1196.6 - Rs 1075) x 33 shares).

So effectively the investor makes Rs 4,012.80 by investing Rs 98,100 for a period of 15 days. This is an absolute return of 4.09% but works out to an annualized return of 100%.

Note: Issue closing date is July 3, 2007 and the shares of the FPO listed on July 17, 2007. The investor puts in the maximum application that he can in the retail category at the upper end of the price band.

Sunil S Matkar -