Half the IPOs in August trade below its issue price

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The month of August 2021 would be remembered well in the history of the Indian stock markets. As equity benchmark indices Sensex and Nifty 50 both were on a record-breaking spree for the most part of the month. That apart the month was busiest for investment bankers as ten companies debuted on the bourses. Of the ten that got listed, eight companies through their initial public offering (IPO) cumulative raised Rs 18,242,95 crore in August 2021 making it the highest since November 2017. Whereas the remaining two raised around Rs 2,244.6 crore in the month of July 2021 but got listed in August.

Ample liquidity, buoyancy in secondary markets and an opportunity to participate in India’s booming internet economy were some of the key reasons for such huge fundraising. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the performance of the IPO market usually has a strong correlation to the performance of the secondary market.

“If the stock market is bullish, it attracts a large number of investors into IPOs. Particularly, new investors lured by high potential profits, get attracted to new offers and the IPO market has always done well during market booms,” added Vijayakumar.

Issue size

The biggest issue of the month was Nirma Group’s cement arm Nuvoco Vistas that raised Rs 5,000 crore through its IPO, followed by Chemplast Sanmar that rose Rs 3,850 crore. While the online classified portal CarTrade Tech raised almost Rs 3,000 crore.

Subscription

Unlike the mad rush witnessed in the previous few months, the response for IPOs in August was subdued especially from retail investors who were selective towards subscribing.

Commenting low subscription numbers by retail investors in the second week of August Abhay Doshi, founder of Unlisted Arena who tracks and deals in unlisted shares said that, “subdued response to some recent IPOs which has certain specific reasons like the correction in mid/small cap which shook the sentiments of investors.”

According to Doshi, retail investors have not lost their appetite as the primary market had always been an attractive segment for retail investors and FY20-21 has delivered stellar returns.

Performance

Half of the IPOs got listed at a discount in the month of August. Barring Devyani International (up 56.67%) and Rolex Rings (up 38.78%) rest all IPO saw muted to disappointing listing.

“Discount listing was due to most of the IPOs were expensively priced and growth - valuation equilibrium was not favourable,” Doshi added.

Windlass Biotech proved to be a wealth destructor as investors lost over 24%, followed by CarTrade Tech IPO that wiped out 11.37% from its issue price.

IPO lineup

According to a report by the daily financial Business Standard at least five companies are set to launch their IPOs in the month of September 2021. These companies could cumulative raise Rs 6,595 crore. Two companies Vijaya Diagnostic Centre (issue size Rs 1,895 crore) and Ami Organics (issue size Rs 570 crore) are set to hit the streets on September, 01.

The other companies that are expected to launch their public offerings include Arohan Financial Services, Penna Cement, Shri Bajrang Power and Ispat Limited.