Two-thirds of the companies that hit the markets via initial public offerings (IPO)s over the last decade have generated positive returns, according to information sourced from Prime Database.
Interestingly, the highest number of value creators were listed in FY21, the first year of the pandemic. While 83% of the companies listed in FY21 are trading in the green, the share for FY22 is 62.3%.
However, there have been some standout losers too. Shares of One97 Communications, the parent firm of Paytm, for instance, has lost more than 67% over the offer price of Rs 2,150, translating into a market-cap loss of Rs 94,119 crore.
Shares of V-Mart Retail and Avenue Supermarts have rallied the most among the newly-listed firms; investors in these retailers have made 17 times and 14 times the investments, respectively. Those who picked up shares of Dixon Technologies and IRCTC have done well too; these stocks have earned buyers 12 times their investment.
Since FY13, around Rs 3.12 trillion has been raised by 222 companies in the primary market with FY22 alone contributing more than a third of this amount; in FY18, an amount of Rs 81,500 crore was raised. Only mainboard companies have been considered for this study.
As far as listing day gains go, FY17 was the best year in the past 10 years, with 21 of the 25 stocks generating positive returns. The study excluded FY14 as there was only one listing that year. While about three-fourths of the companies yielded listing gains in FY21, the ratio was 68% for FY22.
Pranav Haldea, MD of PRIME Database, observed that applying in IPOs for listing gains has always been a bit of a gamble. “Every stock which has performed well on listing day may not necessarily extend its good run over long term and vice versa a stock which doesn’t do well on listing, may deliver positive returns over a period of time,” Haldea said.
Haldea pointed out that there needs to be greater scrutiny of companies’ accounts pre-listing because it has been noticed that in some instances, the financial performance deteriorates sharply post listing. For instance, after reporting profits in the four quarters between June 2020 and March 2021, Cartrade Tech slipped into a loss for the remaining three quarters to December 2021, having listed in August that year. “Companies possibly “dress up” their books in the months preceding the IPO,” Haldea said.
