Few IPOs in 2022 have given multibagger returns while some failed miserably
Posted by : Sheen Hitaishi | Wed Oct 12 2022
People often make money in stock markets by investing or trading, rather than participating in the F&O segment, which is far more sophisticated and riskier for those with less experience. It’s important to remember that the majority of investors participate in the secondary market, or, to put it in another way, buy shares of companies that are already publicly traded.
Investing in the primary market is another way of investing that is sometimes disregarded because of its challenges, such as higher minimum investment amounts and larger lot sizes. This comprises making investments in a company at the time it goes public via an IPO, and another type, called an FPO (Follow-on Public offer). Typically, investors utilise it as a means of making money by investing in IPOs to profit from listing gains, though this can occasionally result in losses as well. Now that this kind of investing is increasingly popular, it is critical to comprehend whether it is favourable for investors.
So, look at a few of the initial public offerings (IPOs) of firms that have been listed on exchanges this year and see if they were successful in delivering gains or disappointed investors. We’ll examine 6 of these IPOs, 3 of which have provided investors with the largest gains till date and the others with the lowest returns.
Few IPOs succeeded so far to produce multibagger returns after listing
Initial Public Offerings (IPOs) can assure prosperity that benefits every country in two ways. First, by enhancing growth and expanding investment options. Second, IPOs give our country’s most dynamic and exponentially growing organisations the chance to obtain the funds they require to expand and generate new opportunities.
With such optimism, a large number of businesses have announced IPOs this year, including some extremely well-known brands like Adani Wilmar & LIC and numerous small but fundamentally good businesses raising money to accomplish their expansion or debt repayment aspirations. Even though there were relatively few laggards compared to winners, there were still a few businesses that either failed to gain investors’ confidence or were unable to provide fair valuations, and simply decreased investors’ wealth. The graph below highlights few names, that we shall discuss in the next half of discussion.
As seen in the graph the top 3 IPOs that delivered highest returns, consists of only those which delivered multibagger returns including Campus with 103.4% followed by Veranda Learn at 146% and lastly, Adani Wilmar with 226% returns. While on the other side AGS transact delivered highest negative returns followed by LIC India & UMA Exports, which have eroded investors wealth by almost 34.2% & 27.2% respectively. Now, let’s look at the company profiles and understand whether there is any possibility for further gains or not.
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Campus Activewear
India’s leading sports and athleisure footwear business, Campus Activewear Limited, was founded in 2005. Their first public offering began on April 26 and ended on April 28, 2022. The IPO had a lot size of 51 shares and became public on May 9th, 2022, at a price of Rs292 per share. Campus Activewear IPO got subscribed 51.75 times, which includes subscription of 7.68 times in the retail segment, 152.04 times in the QIB category, and 22.25 times in the NII category.
The company is in the footwear business and holds a virtual monopoly in branded athletic and athleisure footwear in India. The overall footwear Industry (Rs 72000 crore) is expected to grow at a CAGR of 8% in FY20-25E whereas sports and athleisure segment (Rs 11000 crore) is expected to increase at a CAGR of 15% during the same period.
Veranda Learning
Incorporated in 2018, Veranda Learning Solutions Limited provides students, graduates, professionals, and corporate personnel with online and offline coaching services for career-defining courses like UPSE, Chartered Accountant, Banking, and Government Exams. Their IPO was available from March 29 to March 31 and went public on April 11 at a price of Rs 137. It was subscribed 3.53 times and had a lot size of 100 shares. The company, which operates in the online and offline education sectors, has raised funds for the repayment or prepayment, in full or in part, of all or specific borrowings as well as the payment of Edureka’s purchase consideration.
Adani Wilmar
Adani Wilmar is an FMCG food company that was founded in 1999 as a joint venture between the Adani Group and the Wilmar Group. It provides the majority of the basic kitchen necessities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar. Their main goal of raising funds was funding capital expenditure for expansion of existing manufacturing facilities and developing new manufacturing facilities.
Adani Wilmar IPO opened on 27th January, till 31st January for raising Rs 3600 crores. IPO got listed on 8th February 2022 at Rs 230 per share and was subscribed 17.37 times. Lastly, it is one of the few large FMCG food companies in India to offer most of the primary kitchen commodities and is no. 1 edible oil brand in India with a market share of 18.3%. As the food category is a large space that is significantly underpenetrated and has decadal growth opportunities ahead, Adani Wilmar can be one of good choices.
LIC India
LIC, the largest insurance provider in India with market share of 66.2% in new business premium also came up with an IPO this year which miserably failed to meet the investors’ expectations despite high hopes. This was also the largest IPO in the history of the markets. Their IPO opened on 4th May 2022 and closed on May 9th, 2022. Issue aimed at raising Rs 21008 crores and was listed on exchanges on 17th May 2022 at Rs 949 per share.
Since LIC disclosed its IPO ambitions, it has been a hot topic, which further increased after submitting its DRHP in February 2022, and later it got subscribed by 2.95 times. With this initial public offering (IPO), they hoped to reap the rewards of listing equity shares on the stock exchange and further, to conduct a sale offer of 221,374,920 shares by selling shareholders. While the IPO got such heavy attraction, it gave a listing loss to investors by falling 7.75%.
AGS Transact
One of India’s top omni-channel payment solution providers, AGS Transact Technologies Ltd. is also India’s largest deployer of POS terminals at gas stations and the country’s second-largest firm in terms of revenue from managed ATM services. Their IPO which opened on 19th January and closed on 21st January 2022 got subscribed 7.79 times. It aimed at raising Rs 680 crores and got listed on 31st January at Rs 175 per share.
The purpose of the Offer is to execute the Selling Shareholders’ offer to sell the Equity Shares as well as to realise the advantages of the Equity Shares’ listing on stock exchanges, improvement of AGS’s reputation, and establishment of a public market for the Equity Shares in India. It delivered a loss on listing day of 7.83% and thus represented the muted investor’s sentiment. Following that AGS transact is that IPO in 2022 which have delivered highest negative returns till now.
UMA Exports
Since its incorporation in 1988, Uma Exports Limited has been marketing, trading, and distributing agricultural products such rice, wheat, sugar, spices, dry red chillies, coriander, cumin seeds, food grains, pulses, etc. It is a B2B merchant that exports, exports goods to manufacturers, etc. Their IPO opened from 28th – 30th March. It got listed on exchange on 7th April 2022 at Rs68 per share. The company planned to use the Net Proceeds from the Issue for general corporate purposes and to supplement working capital needs. Uma Exports financial performance has shown inconsistency in exports revenue as well as in domestic markets. It has posted super earnings in the last two and half fiscal which raises concern over its sustainability. That’s why on listing day it did manage to gain 23.53% but later failed to maintain the same and have till now delivered a cumulative negative return of 27.35%.
Our view
Veranda, though the management claims that it is a very niche player in online/offline learning solutions, its operations with high losses raise concerns. Many investors have burnt their pockets with investments in loss-making unicorn/tech companies in the recent past and hence caution is needed for the future. While short term momentum appears bullish, it’s important for investors to evaluate quarterly results to keep track of updates.
As for Adani Wilmar, given the growth potential in the Indian packaged food market space and the management’s ambition to diversify and grow faster than the industry, we believe that Adani Wilmar is expected to remain a front-runner in the Indian packaged food market. Further its shares after reaching peak, have started consolidating. So, investors with a long term view can buy share, while existing ones can keep holding them and rebalance their portfolio post subsequent quarterly results.
Lastly, for Campus Activewear the stock has strong fundamentals and huge potential in Indian as well as global markets. Even the shares of the company are bullish on short term time frame, while for long term it shall depend on their next quarterly results. The stock has always been on an uptrend post listing with a minor correction in the beginning due to selling pressure by investors booking gains. Therefore, it is expected by analysts to perform well in the long term in this sector.
Whereas, for LIC, UMA Exports and AGS Transacts, few brokerages have updated their rating but still the stocks are yet to rebound above issue price and turn technically bullish. So, a wait and watch approach would be more preferred rather than buying right now with high uncertainties.
ABOUT THE AUTHOR
Ketan Sonalkar (SEBI Rgn No INA000011255)
Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.
Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice
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