After a brief period when IPO listings seemed to be turning profitable, the curse of over-exuberant pricing hit home to derail the party that was building up.

Three companies listed last week, and without exception, brought sorrow to their investors. For the record, the three listings were those of DB Realty, Emmbi Polyarns and Hathway Cable & Datacom.

The common factor between DB Realty and Hathway Cables was its pricing ( read as over-pricing ).

DB Realty is into real estate development focusing on projects in the residential, commercial, retail and other projects, such as mass housing and cluster redevelopment, in and around Mumbai.

The key concerns around this company are its limited operating background, concentration of projects in and around Mumbai and risks arising from delays in project completion which are slated for completion in 2012.

Interestingly, the revenue recognition accounting of this company will ensure sharp income and profitability spikes in years that projects are completed, but that by itself cannot negate the concerns.

The CMP of the stock is Rs.421 which is a good 10% below its issue price of Rs.468 ( which incidentally was the lower band of its IPO ). Given the budget announcement  levying a 10% service tax on properties that are under construction, the revenues of the company are likely to take a hit.

Add to this, the high probability of an interest rate hike to arrest inflationary pressures and the picture that emerges is far from enthusing.

Hathway Cable & Datacom is a  provider of analog and digital cable television services. The equation here is clear-cut. The fortunes of this company are primarily interlinked to the success it has in getting its analog customers onto its digital platform.

After listing at a marginal premium of 4%, the stock received a slam-dunk from institutional investors, resulting in its closing at a 12% discount to its IPO price.

With abnormally high debt on its books, this company is exposed to the risk of high interest costs and a negative return on Net Worth. Added to this are accumulated losses of  Rs.4,274 million and the harsh fact that it will need to compete with deep-pocketed DTH platform players.

Again, the road ahead does not enthuse.

Emmbi Polyarns, the third listing,  too did not perform well on its listing day and closed at a hefty 38% discount to its issue price of Rs.45 per share. The IPO price was such that investors who derive psychological comfort from a two-digit offer price, gravitated towards it. The results should have been obvious though.

For the record, the company operates in the packaging industry and manufactures woven polyethylene, polypropylene products, jumbo bags & woven sacks. Hold your breath, this company has also diversified into the water conservation space on the back of which it had positioned its issue.

Notwithstanding the high quality yarns it puts out, market wisdom has ensured its share price is relegated to where it always belonged.

When viewed against the backdrop of such IPOs, one can’t help but recognize  the irony of the much better quality and fundamentally sound PSU IPOs / FPOs  struggling to evoke retail investor interest simply because the Government’s understanding of market dynamics is limited.

And so, the FIIs continue to laugh their way to the bank ………