August sees a reversal of fortune for IPOs

August is not auguring well for the vibrant primary market that has been witnessing back-to-back issuances as companies rush to benefit from the overall buoyancy in secondary markets. Most companies that made their debut in the current month have already seen share price dip below the issue price.

The current calendar year has seen as many as 36 new listings with most of the newly-listed firms seeing a strong listing. The trend, however, has witnessed a sort of reversal in August that saw as many as eight initial public offers (IPOs) hit the market – the most since March when nine new issues were launched.

A total of 10 companies got listed on the bourses in August and seven of those are currently trading below their respective issue prices. Even those that are above their issue prices are barely managing as the spread is only marginal.

Also read: Biggest beneficiaries of IPO boom -- venture capital funds, private equity players

Companies like Windlas Biotech, CarTrade Tech, Nuvoco Vistas Corporation, Glenmark Life Sciences, Krsnaa Diagnostics, Chemplast Sanmar and Aptus Value Housing Finance India all made their debut in August and are currently trading below their respective issue prices.

Windlas Biotech has been the worst-performer of the lot with the shares losing nearly 25 per cent compared to its issue price of Rs 460. On Thursday, it was trading around Rs347. CarTrade Tech is also nearly 11 per cent lower at Rs 1,448, compared to its issue price of Rs 1,618.

On the other hand, the best listing of the month has been Devyani International whose shares are currently trading around Rs 113 – nearly 26 per cent higher than its issue price of Rs 90.

Also read: What exactly is an IPO and how can one apply? Here’s a primer

Market participants attribute this trend to a combination of factors including valuation concerns and investors becoming more selective at a time when there are too many issues coming to the markets. Incidentally, the quantum of subscription also took a hit in some of the recent IPOs when compared to many of the earlier ones.

The availability of peers with a clear trading history and higher profitability at a time when it is believed that many issuers are pricing their shares on the expensive side is also acting as a catalyst, add market experts.

For instance, Nuvoco Vistas Corporation, which is a cement manufacturer from the Nirma Group, posted a net loss of nearly Rs 26 crore in FY21. There are listed cement manufacturers like Ultratech Cement, ACC, Grasim Industries and Shree Cement among others that have a long trading history and are profitable as well.

Also read: IPO boom! Over 30 companies file papers with SEBI in last one month; will the trend continue?

On an overall basis, the year 2021 has seen 36 new listings and 10 among those are currently below their respective issue prices. The worst-performer of the year is Suryoday Small Finance Bank, whose share price has nearly halved compared to its issue price of Rs 305. On Thursday, shares of the small finance bank were trading at Rs 158.

It is followed by Kalyan Jewellers that is currently trading around Rs 64, which is more than 27 per cent lower than its issue price of Rs 87.

Also read: Emcure Pharma plans Rs 4,000 crore IPO