By Rajesh Kurup
The rush to money in on the preliminary public providing (IPO) frenzy and excessive stock valuations have led to many corporations itemizing at a discount this year. Of the 36 corporations that raised funds via IPOs since January, 11 listed at a discount.
A reduced itemizing is when a stock ends beneath the difficulty worth on market debut.
Kerala-based Kalyan Jewellers topped the charts with its share worth closing decrease by 13.45% on the primary day of the itemizing. Chemplast Sanmar was at the underside pecking order with a 1.13% discount.
“The IPO price of most of the companies, which went public recently, was at high valuations, which will be difficult to sustain in the long-run. Further, most IPOs were highly-oversubscribed with the leveraged participation, which led to quick profit booking or unfolding of leveraged position,” Mahesh Singhi, managing director at international funding banking agency Singhi Advisors stated.
“When these shares come in for listing, they began to trade at discounted prices, resulting in retail investors missing out on listing gains. A solace to the investors who subscribed to the IPOs is that most of the companies are now trading above the IPO price, but this won’t remain the same in future,” Singhi stated.
Windlas Biotech (discount of 11.59%), Suryoday Small Finance Bank (9.44%), Cartrade Tech (7.29%), Nuvoco Vistas Corp (6.79%), Anupam Rasayan India (5.24%) and Macrotech Developers (4.70%) had been amongst others with discounted itemizing this year.
Of the overall 11, 5 of the discounted itemizing, together with Windlas Biotech and Aptus Value Housing Finance India, had been in September (see desk).
“The weak listing of the last few IPOs can be attributed to the weakness in the broader markets at the time of their listing. Most IPO-bound companies belong to the small and midcap space where there was weakness in the early part of August. As an IPO cycle moves on, valuations tend to get more expensive,” Pranav Haldea, managing director at Prime Database Group, stated.
“I don’t see the discounted listing of a few companies to halt the primary market. There is a healthy pipeline of IPOs, and if the pricing is attractive and the secondary market continues to remain bullish, we expect to see good demand and listing,” Haldea stated.
The variety of discounted listings this year is on the upper facet in contrast with 2020, when 14 corporations launched IPO, of which 4 corporations debuted with reductions. These firms had been SBI Cards & Payment Services, Angel Broking, UTI Asset Management Company and Equitas Small Finance Bank.
IPOs in 2021
Riding on the increase within the stock markets, corporations raised about Rs 47,722 crore thus far this fiscal, in contrast with Rs 31,128 crore within the final fiscal.
With one other 15-20 corporations, corresponding to Seven Islands Shipping, Arohan Financial Services, Paras Defence & Space Technologies and Shriram Properties, within the pipeline, this fiscal is predicted to be one other good year for IPOs.