Grey market Blues - Rpower

The debut of Reliance Power (RPL) shares on the Mumbai Stock Exchange (BSE) and the National Stock Exchange (NSE) was one of the most spectacular fiascos in recent times in the Indian primary market. It was hyped up so much that when the stock crashed below its offer price, even grey market investors felt the tremors.

Scores of investors are believed to have refused to pay up after buying RPL shares shelling out double the Rs 450 offer price as premium. Usually, operators do not lose money because shares invariably list at a premium to the last traded price in the grey market. Sometimes, if there is a marginal loss, the difference is settled through cash and the show carries on to the next IPO. However, the RPL stock is believed to have spawned a Rs 2,000-2,500 crore payment crisis in the unofficial bucket (dabba) shops most of which are in Gujarat centres such as Ahmedabad and Rajkot. That is because, it debuted at a 21 per cent premium to its offer price of Rs 450 but soon sank below it. It now trades at a discount of Rs 175 to the issue price.

With the other two big IPOs —Wockhardt and Emaar MGF —bowing out due to poor investor response, the below-the-ground operators are stuck for a while.

That brings us to the point, how to regulate this when-issued market. It’s difficult, but then, sources say that it is tough for that market to function without the connivance of the issuers and their investment bankers. Regulating them better could be the answer.