IPOs that could have made you a millionaire

nvestors who chose the initial public offerings route in May to make their first million must be laughing their way to the bank. After a sluggish first quarter (Jan-Mar 2007) in terms of IPOs, the companies, which have listed in the second quarter especially in May, were fairly strong. Companies like Nitin Fire Protection, MIC Electronics and McDowell have had a dream run on the bourses.

 

First let's see what an IPO is all about. An initial public offer, or IPO, is the first sale of stock by a company to the public.

 

Now, how would these issues make you a millionaire? Assuming that you were allotted a 1,000 shares of Nitin Fire protection at its IPO issue price of Rs 190 per share, your total expenditure would be Rs 190,000. The stock listed today at Rs 332.5 on the NSE, a premium of 75%. This means if you have sold off the shares moments after listing, you would have made Rs 3,32,500 --- a clean profit of Rs 1,32,500. However, if you sold that stock at 9:57 am at a price of Rs 508 on the NSE, you would have made a profit of Rs 3,18,000. This is an oversimplified assumption for a better understanding for the benefit of the reader as a retail investor generally does not get the number of shares that he had subscribed.

Similarly, MIC Electronics listed at Rs 262.5 on May 30 at a premium of 75% to its issue price of Rs 150 per share. Your investment on 1,000 shares in the company, which is engaged in the design and manufacture of True Colour LED video display systems, would be Rs 150,000 and your profit would be Rs 112,500. The stock today is trading at a high of Rs 374 on the BSE, so if you sold at these levels your profit would be Rs 2,24,000.

But does this hold true even for relistings. Let us take the case of McDowell's, which had a base price of Rs 163. The stock listed on May 30 at Rs 195.60. If you had purchased 1,000 shares of McDowell's your investment would have been Rs 163,000 and your profit would be Rs 32,600. The stock was trading at its upper curcuit on May 31 and June 1, respectively. It is currently trading at Rs 339.40 on the BSE, so if you sold at these levels your profit would be Rs 1,76,400.

If you have not invested in any of these stocks and are still eyeing those millions, then you do not need to fret. Nishit Master, Analyst, Anand Rathi Securities, feels that investors can once again take long positions in Nitin Fire Protection as there is still some upside remaining in the stock. Ashu Madan, Regional Head, Religare Securities, believes that MIC Electronics will continue to do well for sometime.

As far as the performance of the company is concerned in the forthcoming months, let's hear it from the management. Nitin Shah, Chairman and MD of Nitin Fire, has said the company will cross a turnover of Rs 300 crore and profits of over Rs 30 crore in FY08.

Those who are eyeing the elusive pot of gold can wait for the mother of all IPOs-- the DLF issue, which is in the price band of Rs 500-550 per share. Wishing you happy millions ahead.