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What ails co shares? They're falling below IPO price

Cos in a rush to tap bullish market by getting listed

What ails co shares? They’re falling below IPO price

What ails co shares? They’re falling below IPO price

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Mumbai, Mar 29 Even as the capital market is flooded with IPOs these days, company shares continue to fall below their IPO prices for several reasons.

Most IPOs these days are not 'Fresh Issue' of equity by the company, rather they are 'Offer for Sale', wherein existing shareholders exit and encash their investments.

So, the benefit for significant incremental growth accruing to the investing shareholders is limited, with only steady state of growth for the business.

Thus, post IPO no significant growth play exists to keep driving the share prices up. Hence, the upside gets tested and over by the time of listing of the stock.

"Recent IPOs have not performed very well. There is a fair amount of volatility for past 2-3 weeks in the secondary market, which has impacted the listing performance of IPOs," says Pranav Haldea, managing director, Prime Database.

There is a very strong pipeline of IPOs which have received SEBI approval or have filed with SEBI for approval. If the sentiment turns bearish, we will see a slowdown in the primary market activity as well, he said.

According to Haldea, FPIs have invested heavily into Indian equities over the last one year. However, rising Covid cases might play a dampener. With reduced listing gains, IPO finance will also take a hit.

Markets are presently bullish. Most IPOs come fully priced in terms of valuations, with limited upsides thereafter. Therefore, post the IPO, the sustainability of share prices above listing price gets limited, resulting in weak share prices.

Most investors and/or traders participate in the IPO to benefit from the opportunity to make quick and short term gains by investing into the IPO. They flip and profit the stock. Institutions, Retail and HNIs are all trying to book profits fast, resulting in higher supply and less demand for the shares taking the price down.

With the country's Capital Markets being bullish, there is a rush of Companies looking to get their shares public. Investors will want to participate in most of the good companies. They end up churning their portfolio from one IPO stock to another booking some profits.

"Our view is that the IPO market remain vibrant. Once valuations get reasonable for investors, there will be even more participation in the IPOs. Some historic IPOs like LIC of India are expected in the next fiscal which should ensure IPO Markets will continue to do well. Being selective and long term can help investors make money," Gurunath Mudlapur, Managing Director, Atherstone Capital Markets Limited said.

For most good IPOs large amounts are financed by NBFCs resulting in IPOs getting subscribed by 100 times or more. HNIs investing on borrowed funds into an IPO many times have found it hard to generate positive returns after providing the cost of borrowing. It is pertinent to note that hype may not justify the fair price of a stock in long term.

Company IPO Size (Crs.) Last Trading Price (Rs.) Listed On Issue Price (Rs.) Listing price Change % After Listing
Suryoday Small Finance Bank Ltd IPO 580.84 279

Mar 26 ,2021
305 292 -8.52%
Kalyan Jewellers India Ltd IPO 1174.82 78 Mar 26 ,2021 87 74 -10.34%
Laxmi Organic Industries Ltd IPO 600 191.4 Mar 25 ,2021 130 155.5 47.23%
Craftsman Automation Ltd IPO 823.7 1495.1 Mar 25 ,2021 1490 1359 0.34%
Anupam Rasayan India Ltd IPO 760 499.6 Mar 24 ,2021 555 520 -9.98%
Easy Trip Planners Ltd IPO 510 182.2 Mar 19 ,2021 187 212.25 -2.57%
MTAR Technologies Ltd IPO 596.41 1012.85 Mar 15 ,2021 575 1050 76.15%
Heranba Industries Ltd IPO 625.24 634.5 Mar 05 ,2021 627 900 1.20%
Railtel Corporation of India Ltd IPO 819.24 128.7 Feb 26 ,2021 94 109 36.91%
Nureca Ltd IPO 100 599 Feb 25 ,2021 400 635 49.75%
Brookfield India Real Estate Trust IPO 3800 219.25 Feb 16 ,2021 275 281.7 -20.27%
Stove Kraft Ltd IPO 412.63 450 Feb 05 ,2021 385 465.9 16.88%
Home First Finance Company India Ltd IPO 1153.72 466.85 Feb 03 ,2021 518 618 -9.87%
Indigo Paints Ltd IPO 1169.12 2295.9 Feb 02 ,2021 1490 2607 54.09%
Indian Railway Finance Corporation Ltd IPO 4633.38 22.95 Jan 29 ,2021 26 24.9 -11.73%
Antony Waste Handling Cell Ltd IPO 300 256.45 Jan 01 ,2021 315 280 -18.59%
Mrs Bectors Food Specialities Ltd IPO 540.54 336.75 Dec 24 ,2020 288 500 16.93%
Burger King India Ltd IPO 810 133.2 Dec 14 ,2020 60 112.5 122.00%

Kumud Das
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