Most Blockbuster IPOs Disappoint: 7 of 11 Trade Below Issue Price

Disappointing Returns: A Closer Look at India’s Blockbuster IPOs

Despite raising substantial capital, many high-profile IPOs in India have failed to deliver expected returns, raising questions about pricing strategies and market conditions.

The Performance of Major IPOs

The trend of underwhelming returns from blockbuster IPOs is evident, with seven of the eleven companies that went public since 2021 now trading below their respective issue prices. These companies collectively raised ₹1.05 trillion, but their current market valuation has plummeted by 15.3% to ₹88,979 crore. Notably, the National Stock Exchange (NSE), which raised ₹22,563 crore in its recent IPO, has seen its shares dip below the issue price of ₹1,785, closing at ₹1,769.30.

Among the notable underperformers, Swiggy’s shares have fallen by 35%, while Paytm’s parent company, One 97 Communications, is down 22%. Other companies like NTPC Green Energy and Life Insurance Corporation of India (LIC) have also seen declines ranging from 10% to 17%.

The Outliers: Success Stories Amidst the Downturn

Despite the overall trend, a few IPOs have managed to defy the odds. Tata Capital is trading slightly above its issue price, while Hyundai Motor India has seen a 7% increase. More impressively, LG Electronics India and ICICI Prudential Asset Management Company have surged by 53% and 50%, respectively, indicating that not all large IPOs are created equal.

Factors Behind the Disappointment

Industry experts point to several factors contributing to the lackluster performance of these IPOs. G Chokkalingam, founder of Equinomics Research, emphasizes the importance of pricing and timing. He notes that when IPOs are priced attractively and backed by strong fundamentals, they tend to perform better. Conversely, a lack of secondary market buoyancy can lead to disappointing returns.

Ratiraj Tibrewal from Choice Capital Advisors echoes this sentiment, suggesting that companies like LIC and Paytm were “priced to perfection,” leaving little room for growth post-listing. In contrast, IPOs like LG Electronics and ICICI Prudential Life offered more attractive entry points for investors, which may explain their subsequent success.

Looking Ahead: The Future of IPOs in India

As the primary market remains active, the outlook for future IPOs will largely depend on market conditions and investor sentiment. Chokkalingam predicts that if the secondary markets remain tepid, the number of fresh issues and the initial listing pops may diminish significantly. Investors will need to remain vigilant and discerning when considering new IPO opportunities.

Key Highlights

• 7 out of 11 major IPOs since 2021 are trading below their issue prices.
• Collectively, these IPOs raised ₹1.05 trillion but are now valued at ₹88,979 crore.
• Swiggy and Paytm’s parent company have seen declines of 35% and 22%, respectively.
• LG Electronics and ICICI Prudential Asset Management have surged by 53% and 50% from their issue prices.
• Pricing and timing are critical factors for IPO success, according to industry experts.

Investor Note: Investors should approach upcoming IPOs with caution, focusing on pricing strategies and market conditions to gauge potential returns effectively.