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The IPO charm is waning; Resuscitation depends on falling expectations

The charm of the IPO market is fading as quickly as it started. After excellent oversubscriptions and stock market listings, the recent initial public offerings (IPOs) of Nuvoco Vistas and Chemplast Sanmar met with a subdued response from investors. Several recent IPOs did not offer enough listing pop.

Devyani International, the Pizza Hut and KFC franchise, was one of two issues that rose 31.4% over the issue price. could hold up well 90. The other is Rolex rings. IPOs like Windlas Biotech are listed at a discount and stocks trade at a huge 20.2% discount on the IPO price. The other much-touted CarTrade Tech IPO closed 7% below its offer price on the trading day. Krsnaa Diagnostics is listed with a profit of 7%, but is now trading with a discount of 3% on the offer price. Exxaro Tiles is trading just 2.9% above the IPO price. The disappointment of five of the last seven publicly traded IPOs marks a massive shift in sentiment that will dampen the IPO for some time.

The boom in the stock market has prompted IPO issuers to look for a fixed price for their offers. Indian IPOs went from sensible valuations to sky-high valuations in no time, leaving little on the table for investors.

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“Investors become fatigued due to a variety of problems. Issue prices continued to rise as private equity investors considered gray market premiums in pricing the issue, which led to further overvaluations, “said Arun Kejriwal, founder of consulting firm Kejriwal Research.

The fundraising of a few IPOs was not for expansion. Instead, they provide a way for existing investors and promoters to unlock value. Most IPOs have a large supply component that shows that promoters pay off in good times. As the private equity market is also going through the roof, some of this foam can be seen in the primary market. A recent report by Credit Suisse India found that in 2021, with private equity deals hitting a record high of $ 18.6 billion.

Some companies are still gaining appeal with investors because of their scalable or big tech business model. “Investors are leaving China and Zomato is a beneficiary here,” said Nitin Rao of Alpha Ideas, an investment blog.

However, a large number of initial public offerings to be launched may not be supported by such views. The Credit Suisse report found that approximately $ 12 billion worth of IPO filings were filed. Additionally, the market capitalization of Indian stocks could rise as much as $ 160 billion over the next 12 to 18 months without the planned sale of shares by the state-owned Life Insurance Corporation of India.

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