Vedanta's debut proves the pits

The first Indian company to list on the London stock market made a disappointing debut yesterday, with shares in the mining group Vedanta Resources falling 5 per cent below their issue price.

Traders blamed the company, headed by the Indian entrepreneur Anil Agarwal, for flooding the market with 20 million more shares than it had originally bargained for.

Vedanta, India's leading zinc, copper and aluminium miner, raised £507m from the initial public offering, issuing 130 million shares at 390p each. Despite opening at 392.5p, the shares closed 20p lower at 370p, giving the company a stockmarket valuation of £1.12bn. The offer price was at the lower end of the previously indicated range of 360-450p.

"This is a successful IPO," said Peter Sydney-Smith, Vedanta's finance director. "We were oversubscribed, we've got a very good international base, and we're trading."

John Meyer, an analyst at Numis Securities, said: "The shares appear to have been placed principally with hedge funds. [They] are piling into the metals and mining sector, but may be as fast out of the stock as into it, creating the potential for higher-than-normal volatility."

Vedanta's unspectacular debut could raise questions over whether Europe's IPO window is well and truly open. A number of companies are due to list on AIM next week, including Center Parcs, the glass-encased holiday resorts group.