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Strategies & Market Trends : India Coffee House
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To: Jay Rommel who wrote (2316)8/12/1998 10:32:00 AM
From: Nandu  Read Replies (2) of 12475
 
I bought GCTY (just 100) at 36 1/8 yesterday. I think I should
get out pretty soon. Couldn't get the IPO from E*Trade because
of "technical problems".

Anyway, all this hoopla about IPOs reminds me of how the
primary market works in India. The underwriters set a fixed
price (usually Rs. 10 for brand new companies), and
a fixed number of shares to be sold to the public.
Any member of the public can then apply for the shares,
in multiples of 100 share lots. The application
is accompanied by cash for the amount you applied
for. In case of oversubscription, a kind of lottery
system is used to allot the shares. Those who
are not allotted the shares are refunded the cash.
If the issue is undersubscribed, all applicants
are refunded the cash (this rarely happens, since
the underwriter will have clout to get
institutions to buy up).

A scheme was also introduced by which, instead of
sending a cash instrument with the application,
one can sent a lien one a special kind of fixed
deposit in a bank. The investor will thus accrue
interest till the shares are allotted, and won't
have any hassles in getting refunds.

I participated in this only once. Got 100 shares
of Satyam Computers for Rs. 10 each in '91.
Those shares are now around Rs. 500.
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