The IPO frenzy of 2023

The year 2023 witnessed the stock markets reaching an all-time high by the end of November, and it’s highly probable that we will see even newer highs by the year’s end. Among the surge in the indices, one prominent trend was the influx of IPOs (Initial Public Offerings) into the market. Both the Mainboard IPOs, listed on the NSE, and the SME IPOs, typically smaller in issue size and listed on the BSE, experienced significant activity throughout the year.

This year marked the debut of many IPOs, ranging from a Tata Group company—Tata Technologies—to a port management company, JSW Infrastructure, and the fourth-largest pharma company in India, Mankind Pharma. Additionally, online travel portal Yatra and a homegrown BPC (Beauty and Personal Care) brand, Honasa Consumer (holding company of Mamaearth brand), entered the stock exchanges.

IPOs are popular for two reasons. One reason is the potential for listing gains if the stock lists significantly higher than its issue price. The second reason is the opportunity to acquire a promising stock right from the IPO stage and hold it as a long-term investment.

This year, many Main Board IPOs didn’t disappoint either set of investors. Tata Technologies led the pack with an impressive 162.6% listing gain, allowing investors who were allotted units at Rs 500 per share to exit at levels above Rs 1200 per share on listing day. Although its current gains have decreased from the initial listing, it is still trading at more than double its issue price.

Others, such as Utkarsh SFB, IREDA, Netweb Technologies, and Gandhar Oil, also experienced substantial listing gains and continue to trade significantly higher than their issue prices. The only exception among these is IdeaForge, which has continuously declined after listing and is currently trading about 16% above the issue price.

What’s surprising about this set is that Tata Technologies, Gandhar Oil, and IREDA were all listed in the same week.

While some IPOs more than doubled on listing, there were others that lagged behind, listing below their issue price. Most of these continued their downward trend post-listing. The standout among these IPOs is Zaggle Prepaid, which initially listed 3.5% below its issue price but has surged more than 40% since then.

When it comes to SME IPOs, the story parallels that of Main Board IPOs, with those yielding maximum listing gains maintaining high returns for investors post-listing. Another notable aspect of SME IPOs is their smaller size compared to Main Board IPOs but with a significantly larger ticket size, approximately 8-10 times that of Main Board offerings.

For instance, a Main Board IPO lot might average around Rs 15,000 each, whereas an SME IPO lot could be close to Rs 1,35,000 on average.

Among the top gainers in this category was Goyal Salt, which saw a massive 258% gain on listing day and has maintained returns of 318.4% till date. These successes underscore the increasing influence of small and medium-sized companies that manufacture items ranging from food products and edible oils to clothing and pharmaceutical ingredients.

However, the SME IPOs which had a weak listing below their listing price continued to fall even after listing. The set which saw the lowest listing gains (or losses technically) without exception are all trading below their issue prices at the current juncture. This highlights the caution that must be exercised while dealing with the SME IPOs. Information on these companies is limited and hence taking a decision on which of these companies may be a good investment often becomes challenging. Choosing the right ones can result in massive listing gains but the wrong ones are likely to diminish your invested capital even after listing.

Both the Main Board IPOs and SME IPOs have their place in the system and investors who are willing to bet their monies on every new IPO. This year saw a flurry of activity in the overall IPO space. As the economy grows, next year will probably witness a lot more IPOs, and again some of them will standout with their performance while some would disappoint investors. 

 

 

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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