There has been a slew of e-commerce, tech, fintech companies that have hit the market via the IPO (Initial public offering) route, some have found thundering success, while others fell flat. The number of companies queuing up to float IPOs has been increasing rapidly, this has led to increased interest in certain unlisted companies as well.
Changing landscape of IPOs:
Ben Graham once quoted, “The individual investor should act consistently as an investor and not as a speculator.” However, in this era of instant gratification, there are more individuals who are looking at trades that can earn them quick bucks. IPOs have emerged as an interesting arena for making such quick money over short timeframes. Exiting an IPO upon listing, which is commonly known as flipping, is gaining prominence. There is also a growing trend of investors looking at entry options in these unlisted companies via private equity right before the IPO. This positioning gives them additional leverage to gain substantial returns upon listing.
In the Union Budget FY2022-23, the surcharge for all types of assets was capped at 15% irrespective of the quantum of Long Term Capital Gains (LTCG). This is likely to promote long term investment in start-ups, this change in regime brings the surcharge on unlisted shares on par with listed shares.
In the last 2 months of the year 2021 alone, there were ~22 IPO listings, out of these 15 of the IPOs are currently i.e. as on 27 Jan 2022, profitable with many of them clocking over 25% returns in less than 6 months. Around 16 of them provided gains on the day of listing, almost 10 of them provided over 25% listing gains. These numbers indicate the reason for many investors to look at IPOs as a means to gain supernormal returns.
Table 1: IPO performance of companies listed between November – December 2021
Company Name
Listing Date
Issue Price
Listing Day Gain
Profit/Loss (as of 27 Jan, 2022)
CMS Info Systems Limited
31-Dec-21
216
9.91%
25.83%
Supriya Lifescience Limited
28-Dec-21
274
42.46%
78.61%
HP Adhesives Limited
27-Dec-21
274
22.24%
45.53%
Data Patterns (India) Limited
24-Dec-21
585
29.03%
25.88%
Medplus Health Services Limited
23-Dec-21
796
40.81%
51.22%
Metro Brands Limited
22-Dec-21
500
-1.29%
22.78%
C.E. Info systems limited
21-Dec-21
1033
35%
43.63%
Shriram Properties Limited
20-Dec-21
118
-15.76%
-14.41%
Rategain Travel Technologies Limited
17-Dec-21
425
-19.88%
-11.88%
Anand Rathi Wealth Limited
14-Dec-21
550
6.09%
7.68%
Tega Industries Limited
13-Dec-21
453
60.15%
18.61%
Star Health and Allied Insurance Co Ltd
10-Dec-21
900
0.76%
-13.58%
Go Fashion (India) Limited
30-Nov-21
690
81.54%
39.33%
Tarsons Products Limited
26-Nov-21
662
26.89%
0.66%
Latent View Analytics Limited
23-Nov-21
197
148.02%
158.63%
One 97 Communications Limited
18-Nov-21
2150
-27.25%
-57.41%
Sapphire Foods India Limited
18-Nov-21
1180
3.06%
7.04%
S.J.S. Enterprises Limited
15-Nov-21
542
-5.93%
-27.48%
Sigachi Industries Limited
15-Nov-21
163
270.40%
112.21%
PB Fintech Limited
15-Nov-21
980
22.74%
-20.80%
Fino Payments Bank Limited
12-Nov-21
577
-5.50%
-32.37%
FSN E-Commerce Ventures Limited
10-Nov-21
1125
96.15%
47.72%
Source: Moneycontrol; Jan 27, 2022
There were others such as Paytm IPO which listed at a loss of 27%, the price continues to dip and it currently[UW1] (as of 27 Jan 2022) trades at a loss of over 50%, despite the hype, this was one of the worst-performing IPOs in the last quarter of the year 2021. Needless to say, there is a need to meticulously look at the valuations before investing in IPOs.
Upcoming IPOs and the buzz surrounding them
The pre-IPO market is getting immense attention from investors, many of the companies which are likely to be listed in the near future are already turning into multi-baggers.
Table 2: Upcoming IPOs:
Company Name
Issue Size In ₹ Crores (Tentative)
LIC
70,000
Adani Wilmar
4,500
MobiKwik
1,900
Ixigo
1,600
Penna Cements
1,550
Fincare Small Finance Bank
1,330
Sterlite Power
1,250
Bajaj Energy
5,450
Delhivery
7,460
OYO
8,430
Pharm Easy
6,250
Ola
7,300
Byju’s
4500
Go Airlines
3,600
NSE
10,000
Studds Accessories
450
Swiggy
NA
SBI Mutual Fund
NA
Source: Moneycontrol; Jan 27, 2022
Mobikwick, Fino Paytech, Lava International, Five Star Finance are some of the fintech stocks which are queuing up to float their IPO. However, the damp performance of PayTM IPO has reduced their premium in the pre-IPO market.
LIC is planning an issue size of Rs. 70,000 crore, this is likely to be one of the largest IPOs in the market, it is a part of the divestment plan by the Government.
After the Zomato IPO was well-received, Swiggy’s IPO is the most awaited IPO in the food delivery industry.
The lower probability of gaining allotment in IPO is driving investors to flock to the unlisted markets. Pre-IPO investing comes with risk, it is better to avail the help of professionals like the ones at TATA Capital Wealth to help you assess the risk of the company and invest in accordance with your risk appetite.
24 February 2022
4 mins read
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