IPO watch: Nine (9) mainboard IPOs that debuted this year (2024) are currently trading below their issue prices and have decreased by more than 25%. At the forefront of the losses is Popular Vehicle, which has decreased by 46%, followed by non-banking financial companies and small finance banks, including Fedbank Financial Bank (down 30%), Esaf Small Finance Bank (also down 36%), and Capital Small Finance Bank, which has decreased by 39%.
While 2024 has been an exceptional year for new listings, positioning India among the top three markets worldwide in terms of funds raised and companies listed, the recent market downturn has led to significant losses for these stocks.
Market analysts link the market downturn to disappointing Q2 corporate performances, selling by Foreign Institutional Investors (FII), geopolitical tensions, and various domestic and international economic influences. Interestingly, a Bloomberg news report indicated that foreign investors have been withdrawing unprecedented amounts from Indian equities since October, while also investing heavily in initial public offerings in pursuit of higher returns.
According to the Bloomberg report, the total value of primary market acquisitions, which encompasses IPOs and preferential share sales, reached $11.5 billion this year, breaking the former record established in 2021, as reported by Central Depository Services Ltd. In comparison, global funds have divested over $13 billion on the exchanges, contributing to the correction of the main Nifty 50 index, where its down 11% from its all-time high levels.
Deven Choksey, the managing director of DRChoksey FinServ Pvt, mentioned that foreign investors are putting their money into new papers because they can yield returns more quickly. On the other hand, the selling in the secondary market is influenced by high valuations.
Nonetheless, there has been a clear drop in subscription rates recently, along with a reduction in the returns from IPOs, whether those returns are negative or only marginally positive. Up to this point in November, Afcons Infrastructure Ltd (2.6x), Sagility India Ltd (3.2x), Swiggy Ltd (3.6x), ACME Solar Holdings Ltd (2.8x), and Niva Bupa Health Insurance Company Ltd (1.8x) have faced challenges in reaching full subscription levels during the bidding period, with all offerings concluding at below 4x bids. Additionally, recent challenges have led to uninspired listings.
9 Stocks trading below their IPO price
Popular Vehicle, which debuted on 19 March, began trading at a discount of ₹289.2 from its initial public offering price of ₹295 on the day it listed. Popular Vehicles & Services primarily functions as a Maruti Suzuki dealership in Kerala and was among the initial group of dealers assigned by Maruti Suzuki in India. Popular Vehicle share price hit all-time high level of ₹296.55 on March 21.
In a similar manner, Capital Small Finance Bank, which debuted on the stock market on February 14, 2024, commenced trading at a discount of ₹430.3 compared to its IPO price of ₹468 on its listing day. Capital Small Finance Bank share price touched all-time high level of ₹469 on February 15.
Western Carriers began trading on 24 September 2024 at a discount of ₹171.0 from its initial public offering price of ₹172 on the day it listed. Western Carriers share price touched all-time high level of ₹177 on September 24. Deepak Builders & Engineers India Ltd started its listing on 28 October 2024 at a discount of ₹200 from its IPO price of ₹203.
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