IPO: Mood swings, IPO fizz begins to fizzle out

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Mumbai: Most newly listed companies are seeing a reversal of fortunes on the bourses as the recent sell-off in mid- and small-cap stocks has dented investor appetite in the recent debutants. Shares of companies that have listed since July have fallen as much as 23% from their highs hit after listing.

Weakness in the broader market brought on by concern over hefty, exorbitant valuations without any meaningful correction is being reflected in shares of the recently listed companies, said experts. “Primary market is a reflection of the secondary market sentiment. Most IPOs in the last one year were from mid and smallcap space,” said Geetanjali Kedia, senior research analyst at SPTulsian.com

The BSE IPO index is down 6.2% from an all-time high of 12,843.44 on July 23. BSE MidCap index is down 2.2% and the SmallCap index is down 5% from their all-time highs hit on August 4. Sensex has gained nearly 3% in the period The sharper sell-off has also been on account of the steep valuations.

“It is also a function on how much is left on the table. IPO pipeline will not dry up, it will remain strong, but companies may have to tone down valuation expectations in the short term,” said Kedia.

Despite the drop, shares of half of the companies listed since July are still trading above their listing prices. Companies listed this year have on average listed at around 23% premium to their IPO prices but companies listed in August are excluded, the average would be 28%.

Among companies that listed in August, Aptus, Chemplast, Nuvoco, CarTrade, Krsnaa Diagnostics, Windlas Diagnostics, and Glenmark Life Sciences are down over 1% to 25% from their IPO prices. Food ordering platform Zomato continues to defy naysayers, still trading 63% over its IPO price.

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