Last year may have been the best for companies that listed after their initial public offerings in the midst of a pandemic that crimped economic activity and left many jobless. However, many companies that debuted on the stock exchanges in 2021 appear to have lost their shine, with some of them have declined by 20 to 50 percent.
Shares of One97 Communications, Zomato, Star Health and Allied Insurance, PB Fintech, Sona BLW Precision Forgings, Nuvoco Vistas Corp., Indian Railway Finance Corp., Chemplast Sanmar, CarTrade Tech, FSN E-Commerce Ventures, Aptus Value Housing Finance and Aditya Birla Sun Life AMC, which came out with big IPOs – each exceeding Rs 2,500 crore – are now trading anywhere from 8 to 50 percent lower than their recent 52-week highs.
Eight of the 12 companies that came out with IPOs of Rs 2,500 crore or more are still trading below their issue price.
“Big IPOs of 2021 are currently quoting much below their 52-week highs and in some cases, even below their offer price. This is largely due to these being priced quite aggressively based on the momentum in the IPO markets prevalent then,” said Deepak Jasani, head of retail research at HDFC Securities. “The fact that some of these started to fall sharply has caused some rub-on effect on other IPOs and till these companies are able to prove the robustness in their business models and/or sufficient cashflow/profit generation, they may not see sharp recovery.”
Milestone year
About 64 companies came out with IPOs totaling Rs 1.2 lakh crore in 2021, which analysts said was a triumph and a major milestone for the Indian capital markets.
However, after bumper returns on listing day, shares of companies including Paras Defence and Space Technologies, Sigachi Industries, Latent View Analytics, Tatva Chintan Pharma Chem, Indigo Paints, GR Infraprojects, MTAR Technologies, GO Fashion India, Clean Science and Technology, and Nureca are also trading 8 to 40 percent lower that their 52-week highs.
“The issue price, the listing price and subsequent trends are important,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services. “In this perspective, 2021 IPOs had phenomenal successes like Nykaa and Nazara and disasters like Paytm. The lesson from this experience is that the regulators, merchant bankers and investors must apply more due diligence.”
Analysts said that the standout feature of IPOs in 2021 was the listing of new-age digital companies. A positive feature of the Indian economy is the startup ecosystem. For startups to flourish, it is important that they list in the market.
Currently, almost 40 companies have got regulatory approval for their planned IPOs for a total of about Rs 50,000 crore. Over 30 companies are awaiting the regulator’s approval to go ahead with Rs 60,000 crore of IPOs and at least half a dozen companies have filed draft papers so far this year.
Additionally, the state-owned Life Insurance Corporation of India is expected to start filing draft papers for its public issue by the third week of January. At about Rs 1 lakh crore, the LIC IPO is estimated to be the biggest offering in India’s equity markets.
“The IPOs of 2022 will have to be priced and timed appropriately, otherwise investors may not subscribe to them, going by the losses they have incurred in the 2021 IPOs,” Jasani added.
