As many as 21 companies went public this year and shares of more than half of all these companies are trading below their issue price. The main reason behind this has been the market volatility, aggressive pricing and sometimes stock and sector-specific issues.
Out of 21 initial public offers (IPOs) in 2018, shares of 11 companies now trade below their issue price. “As the market went up, so did the expectation and pricing of the IPOs. Pricing issue was in sync with market sentiment,” said Arun Kejriwal, director of Kejriwal Research and Investment Services Pvt. Ltd.
The companies that can be listed as the top losers in the pack are Apollo Micro Systems Ltd and ICICI Securities Ltd. These companies were down by 50% and 39% respectively from their issue price.
Apollo Micro Systems actually rose 65% at close on 22 January, the day it started trading. But afterward, the stock corrected and is now decreased by more than 50% from its issue price.
“Greed factor of promoter, merchant banker and PE (private equity firms) rose. All the issues which were priced aggressively and were of low quality were oversubscribed, and that drove up grey market prices, in turn driving up listing gains,” said Kejriwal. “Eventually, market sentiment caught up and prices corrected where they were stretched,” he added.
Listed in April, ICICI Securities had to decrease down the size of its IPO to around Rs 3,520 crores. This happened after the company witnessed low subscription during the share sale on 22-26 March, compared to an earlier target of Rs 4,017 crores.
“It’s a combination of a number of things,” said Pranav Haldea, managing director primary-market tracker Prime Database. “The carnage in the small and mid-cap space, along with aggressive pricing, have hurt many debutantes—particularly in that space. Market volatility too is weighing on stocks at large.”
The Securities and Exchange Board of India (Sebi) capped the expense ratio for mutual funds this week, hurting the stocks of asset manager. Only Bandhan Bank was the best performing stock. It logged 27.25% gains on opening day and currently is up 60.69% from its issue price.