How Burnpur Cem made investors RICH than BGR Energy?
It was a splendid day for BGR Energy and Burnpur Cement; both have outperformed analysts’ expectations by getting bumper listing. Burnpur Cement, one of the established cement manufacturers of Eastern India, has garnered nearly Rs 27 crore whereas BGR Energy, a supplier of systems and equipment for the power, oil & gas, refinery, petrochemical and process industries, mopped up more than Rs 438 crore from the primary markets.
BGR Energy got subscribed 120 times, which was significantly higher as compared to other issues. The reason is that the company is in engineering sector where it supplies equipment for power, refinery sectors. The sector is hot favourite among the investors. However, Burnpur Cement was subscribed just 14.79 times.
Burnpur Cement closed the day at Rs 49.70, with a gain of 314.17% over its offer price of Rs 12 per share and BGR Energy Systems at Rs 902, up 87.92% over its offer price of Rs 480 per share on the NSE.
Such a fantastic listing heightened the market cap of the companies, but does this sharp upmove in stocks make retail investors happy? Lets check with an hypothetical example.
It is a theoretical example. If a person has invested Rs 1,00,000 in the BGR Energy, he would have applied for 208.33 shares. But because of huge oversubscription of 46.92 in the retail segment, the person would get only 4.44 shares in allotment. So the profit for the day one was around Rs 422 per share (Difference between close price and issue price), so in total the investor makes a profit of Rs 1,873.68 (Rs 422 * 4.44 shares).
In case of Burnpur Cement, if a person invested Rs 1,00,000 he would have applied for 8333.33 shares, he would get 537.29 shares in allotment as the retail’s portion was subscribed by 15.51 times only. The profit from this is Rs 37.7 per share, so total profit comes to Rs 20,255.74 (Rs 37.7 * 537.29 shares) on an investment of Rs 1,00,000.
After this comparison, a retail investor, who had invested Rs 1 lakh, earned more money in Burnpur Cement than BGR Energy. It means a person received more than 10 times profit in Burnpur Cement as compared to profit made in BGR Energy on the listing day.
Note: This is just a theoretical example. It is assumed that the number of shares applied or alloted are in fractions and not the minimum quantity as fixed by the company. So actually, there might be some difference in quantity of shares alloted to individuals. This is just to bring out the fact that though it may appear that a retail investor in BGR Energy would have made a windfall has actually performed worse than an investor who applied for Burnpur Cement.
Source: Moneycontrol.com
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