personal finance

Investing in IPOs? Here's how many gave positive returns since start of 2017

Since the start of 2017, we have seen bumper issues from well-known companies as well as shares listing with massive listing gains. According to National Stock Exchange’s (NSE) website, since the start of 2017 there have been 52 initial public offerings (IPOs) till now.

“FY18 was a blockbuster year for IPOs which witnessed record raising of more than Rs 800 billion in the capital markets. Although it has been a record year, approximately 50% of the IPOs are currently trading above their issue price,” says Amishi Kapadia, Senior President & Global Head, Merchant Banking, Yes Securities. Here is a look at how these companies have fared since they made their debut on the bourses.

Biggest gainers:

  • Of these 52 companies that have been listed, 29 have given investors positive returns over the issue price till now-i.e., about 55% of the companies gave positive returns.
  • In total since their listing till date, 12 companies have seen a more than 50 percent increase their share prices over their respective issue prices and of these five have returned more than 100 percent.
  • The highest being Avenue Supermart (the company that owns D-Mart) – since its listing on March 21, 2017 till now, the stock price of the company has gone up more than 444 percent. From its issue price of Rs 299, it closed on August 8 at Rs 1,628.
  • Other companies that have rewarded their investors handsomely are Shankara Building Products, CDSL, Bandhan Bank, HDFC Standard Life, ICICI Lombard General Insurance, and Lemon Tree Hotels.

Gainers’ list


Source: NSE, BSE
CMP as on August 8, 2018 on BSE
* Issue price vs CMP; ** Listing day price vs issue price; Listing day price taken as weighted average price on BSE; ^ Only listed on NSE

The losers:

  • The share prices of the remaining 23 companies are currently below their listing prices.
  • The biggest loser is CL Educate – from its issue price of Rs 502, the share is now trading at just Rs 173 – a drop of more than 65 percent. The company listed on the bourses on March 31, 2017.
  • A total of 16 companies have given negative returns of more than 10 percent.
  • Other companies whose share price fell post listing include ICICI Securities,, Hindustan Aeronautical (HAL), SBI Life Insurance, and TCNS Clothing (the company that has women’s apparel brands like W and Aurelia).

Losers’ list


Source: NSE, BSE
CMP as on August 8, 2018 on BSE
* Issue price vs CMP; ** Listing day price vs issue price; Listing day price taken as weighted average price on BSE; ^ Only listed on NSE.
Issue of bonus shares not considered.

Listing gains vs absolute returns since listing

Going by the data, it cannot be said that companies that have made listing gains are the only ones that are trading above their issue price. There are companies that made neat listing gains and are now trading well below the issue price on the listing day, and vice versa.

For instance, PSP Projects’ listing day WAP was 2.38 percent below its issue price. However, its current market price is 131 percent above its listing price. Mishra Dhatu Nigam listing day WAP was 1.11 percent lower than the issue price, and the current market price now is 55.56 percent above it.

On the other hand, Apollo Micro Systems’ WAP on listing day was 69 percent more than its issue price. But the current market price is 40 percent below the issue price.

Don’t go chasing listing gains

According to Prithvi Haldea, managing director of PRIME Database, there is a lot of speculative interest among retail investors when it comes to IPOs; they invest in IPOswith the sole purpose of making listing gains. “This is the wrong way to look at investing in an IPO. They forget that all companies once they list end up like any other stock in the secondary market. The factors that impact the share prices of already listed companies will impact these as well. They look at how qualified institutional buyers (QIBs) invest and then take a call. They do not take the effort to carefully understand the company,” says Haldea.

Watch-outs while investing in IPOs

The IPO pipeline looks healthy as many more companies are expected to hit the equity market with their issues. An EY report, Global IPO trends: Q2 2018, states that in India, several companies have lined up IPOs totalling US$5bn in the coming months. “Consequently, the prospects for India IPO activity are bright for the rest of year,” it said. Many companies have filed their Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (Sebi).

So, if you are planning on investing in any of the upcoming public issues, don’t just invest to gain from the company’s listing, focus on buying a value stock. To do this there is a lot of information that you can use – don’t just rely on tips from friends and family or news reports. There is no dearth of information for the investor says Kapadia. You can find a lot of information in the company’s DRHP itself.

Company management: You must do background check on the promoters of the company. Look at factors like related party transactions, independence of the board, and key personnel.

Risk factors: There is detailed information in the DRHP on the risk factors of an issue. Do go through the pages on legal suits, past regulatory actions, licences or trademarks, and so on.

Valuations: The valuation of an IPO has to be compared with those of the company’s listed peers. If it is a unique business, you can compare it with listed global peers.

What you should do

Don’t invest in IPOs just to capitalise on listing gains as these may or may not materialise. Do your due diligence in order to buy quality stocks which would normally appreciate in value over time so that you are not dependent only on listing gains. Further, remember that an IPO is not the only route you can take to invest in a company – there is the secondary market as well. So, if you don’t understand the company, wait for it to list and then take a call. Another option you can consider is you take the mutual fund route. Fund houses invest in IPOs and this way you can let the professionals do most of the heavy lifting for you.

This is a trend that Kapadia says she has noticed this time around. A lot of retail investors taking the MF route to invest in new companies.


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