By Urvashi Valecha
Along with the recovery in secondary markets considering that final year, main markets also have shown resilience just after the stellar good results of some corporations that launched their initial public presents in the course of the pandemic. Several initial public offerings (IPOs) have performed pretty effectively upon listing considering that final year, but the momentum has slowed a bit as investors appear to be cashing out with listing day gains. Out of 22 corporations that have been listed considering that August 2020 till date, lots of have come off from their listing day gains.
According to information from Capitaline, lots of of the IPOs which had been at the time of their challenge subscribed numerous instances have declined from their listing day gains. For instance, Easy Trip Planners which was oversubscribed 159.01 instances listed at 11.47% gains but has declined by 11.3% considering that then.
Similarly, other IPOs that had been subscribed by more than one hundred instances from August 2020 till date such as MTAR Technologies, Indigo Paints, Chemcon Speciality Chemicals and Mrs Bectors Food Specialties are down in between 2.78% to 41.87% from their listing day gains. Interestingly, Antony Waste Handling which listed on January 1 this year was subscribed by 13.87 instances and saw a listing day achieve of 29.32%. The stock, on the other hand, has corrected by 34.37% considering that then.
Market authorities have explained that when the secondary markets go by way of a bull phase such as the existing one exactly where the Nifty has rallied from 7,610.25 to 14,549.4 inside a period of one year, lots of corporations make a decision to go forward with their IPO plans. This incentivises lots of traders to invest in IPOs to make fast returns. Siddhartha Khemka, head — retail investigation, Motilal Oswal Financial Services, mentioned, “In a strong market, when the benchmarks and broader markets are performing well, many participants look for opportunities in the IPOs. Traders and HNIs also look at IPOs as a seven to eight day process to make quick returns on listing. Once they make their returns, they sell their IPO shares which can be why many stocks have come off their listing day gains”.
Besides generating fast returns, lots of investors particularly higher net worth people (HNIs) are also forced to sell the shares just after the listing of corporations when they make losses on the leveraged funding for their shares. UR Bhat, co-founder, Alphaniti, a tech-enabled investment platform, mentioned, “In general, the recent IPOs have been coming in at somewhat stretched valuations and the promoters too appear to be relatively new. These are typically signs of the fag end of a bull market. The pronounced oversubscription of such issues often happens with the active participation of investors who leverage to make large applications. This saga typically ends when several such issues fail to generate listing gains and the allottees are forced to sell at a loss that is magnified because of leverage. We may be nearing this stage now”.
Going forward, the outlook for the IPO markets would rely on the behaviour of the secondary markets and IPOs are probably to come in at reduce valuations with their oversubscription numbers decreasing, according to authorities.