The ongoing volatility in the secondary markets has taken a toll on new listings toowith more than 70% of the issues that listed in the current calendar year trading below their issue prices.

Since the start of 2018, a total of 24 companies made their debut on the bourses and shares of 17 such entities have fallen below their issue price.

Further, companies like Apollo Micro Systems and ICICI Securities have seen their share prices halve since listing on the bourses.

Among the few IPO (initial public offer) listings that gained are HDFC AMC, Bandhan Bank, Mishra Dhatu Nigam and RITES.

ICICI Securities, which listed in April, is currently trading at ₹256.30, much lower than its issue price of ₹520.

Apollo Micro Systems has fared the worst with the shares currently trading at ₹119, compared with its issue price of ₹275.

According to experts, while the markets have been quite volatile with a negative bias in the recent past, the fact that so many public issues have lost ground much more than the benchmark indices shows that pricing was done aggressively by the merchant bankers and promoters.

Based on sentiment

“While merchant bankers always maintain that the pricing is decided on the basis of extensive roadshows and feedback from potential investors, the fact remains that it is done more based on sentiment and ability of the market to pay at that time,” said Arun Kejriwal of Kejriwal Research & Investment Services while adding that this quite often leads to mispricing of issues.

The benchmark Sensex gained a marginal 723 points or 2.12% in the current calendar year till date.

Interestingly, some issues, that have fared badly on the bourses, saw huge oversubscription, especially in the segment reserved for high net worth individuals (HNIs) bringing to the fore the age-old issue of IPOs getting subscribed primarily on account of leveraged financing.

HNIs, who borrow money and invest in IPOs, typically do it for the listing gains and hence, sell the shares immediately after listing.

Apollo Micro Systems, which is the worst performer among all companies listed in 2018, saw the HNI portion of its public issue subscribed a whopping 958 times.

“It is high time that an issue which has been debated so often and is still pending with the regulator should be resolved. Until this unrealistic demand is not nipped in the bud, you will have such instances time and again,” said Mr. Kejriwal.