Stock markets have taken a beating in the second half of the financial year, but the average listing gains from 39 initial public offerings (IPOs) since the beginning of October continue to be impressive at 25% — only 7 percentage points down from 31.9% in the first half of the financial year.
The gain is just marginally lower than 28% in the last 10 quarters. It also comes at a time when the broader markets have fallen 21% in the second half of the financial year (till February 25). The benchmark indices have fallen 13% during the same period.
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A total of 38 companies got listed between April and September and they cumulatively raised Rs 50,891 crore through IPOs with the average listing gains being 31.9%. This compares to 39 companies raising Rs 1.1 lakh crore between October and February.
According to Naveen Kulkarni, chief investment officer at Axis Securities PMS, the slight dip in average is due to more supply with big issues absorbing most of the demand. Moreover, selling in the secondary market has made stocks cheaper.
In September, when the secondary market was at its all-time high, Bajaj Housing Finance and Premier Energies got listed at more than 100% premium over their IPO price and PN Gadgil Jewellers was listed at 73% premium.
These stocks are still trading 16-110% higher than their IPO prices. KRN Heat Exchanger & Refrigeration, after listing in early October, is trading over 300% its IPO price and December-listed Bharti Hexacom is 120% higher.
While foreign investors are taking out money from the secondary markets amid concerns related to corporate earnings and volatility from US and China, they are seeing value in the primary market. In the current fiscal, foreign portfolio investors have invested $14.1 billion or Rs 1.2 lakh crore. This amount, comprising both investment through qualified institutional placements (QIPs) and IPOs, is more than twice they invested last year. At the same time, they have taken out $28.1 billion or Rs 2.4 lakh crore from the secondary markets.
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However, Pranav Haldea, MD, PRIME Database Group, said it is unfair to expect all IPOs to list at a premium and trade above issue price in perpetuity even independent of the market sentiment.
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