A Choppy Stock Market Launch

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Even the smallest stock market investor in India must have heard the name! GMR Infrastructure Limited (GMR hereafter) was virtually unknown to investors just a year ago. The company shot in to prominence when, as a very dark horse indeed, it shot past some of India’s top engineering companies, to win tenders to build and to operate modern airports for India ay important centers, including at the capital city of New Delhi.

GMR listed on the National Stock Exchange of India (NSE) on August 21 2006. Shares had been over-subscribed about 6 times-not earth-shaking by Indian standards-and have been placed in large chunks with private and governments banks, and with some other financial institutions as well. Opening day at the NSE and at Mumbai’s other stock market, were nothing to write home about. Why is the stock market wary of this new listing?

Winning a large government tender never does much for stock market confidence in a democracy, because future governments have a love for finding skeletons in the cupboards of their predecessors! This tender decision has been challenged in court by a stock market giant (the Anil Ambani arm of Reliance), which cannot do GMR much good as they enter the domain of free market investors.

Stock market surveys at ground level show that investors question this company’s credentials to build and to run airports. It does have some foreign collaboration, but then companies which lost the tender had tie-ups with the best international airports as well! GMR has been building and running power plants, highways, and sugar factories. Does this have something to do with airports?

Let us hope, for the sake of stock market components which have placed their faith in GMR, that this skepticism is unfounded, and the company realizes bumper profits after paying off the government, which has a huge revenue share in the contract. However, companies which ‘stick to knitting’, and which assiduously build up customer lists, instead of flirting with the corridors of those in power for the day, are safer havens for scarce resources!

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