Three out of the four investment funds, that committed capital in cable distribution firm Den Networks before the IPO, are sitting at a book loss on their investments. Den Networks, which barely managed to scrape through the issue in the dying hours of the IPO deadline early this month, debuted at the bourses at its issue price of Rs 195 and dropped down during the day to close at Rs 163 or 16% lower than the issue price.
The company had roped in two pre-IPO investors that include IL&FS affiliated investment funds besides Emsaf, that is part of $10-billion Emerging Markets Management LLC. It raised Rs 200 crore from IL&FS related funds at an average price of Rs 150/share and Rs 75 crore from Emsaf at an average price of Rs 190 each.
This apart, it had struck deals with Japan’s venture capital firm Softbank and Singapore-based Indea Capital for anchor investment as a part of the IPO. These two anchor investors brought in Rs 50 crore investing at the upper end of the price band of Rs 195-205 and are now sitting on book losses of 20%.
Den Networks joins a list of new companies who got listed recently including some PE-backed firms who are trading at a discount to their issue price. These include Adani Power, Indiabulls Power and Pipavav Shipyard among others.
The poor showing of Den Networks could pose a problem for other companies in the sector who are looking to float an issue such as Hathway which is incidentally is also a PE-backed firm.