Volatility singes market debutants in 2018; over 70% firms trading in red

Seventeen, or a little over 70% of the 24 companies that listed in 2018, are trading in the red

The recent volatility in the markets has impacted the performance of companies that made a debut this year on the bourses. Seventeen, or a little over 70 per cent of the 24 companies that listed in 2018, are trading in the red, shows data collated from Prime Database, a primary market tracker.

ICICI Securities and Apollo Micro Systems are the worst performers, with negative returns of 55 per cent and 59 per cent, respectively. 

Four companies in this pack — Hindustan Aeronautics, Bharat Dynamics, Ircon International and Garden Reach Shipbuilders & Engineers — are public sector undertakings, with the first two names shedding more than 30 per cent each since their debut. 

PSUs are facing a tough time with the overall value of government holding in listed PSUs on the BSE reducing by about Rs 6 trillion from their one-year highs. 

“Investing in new offerings may be riskier than investing in a listed entity with a long-term track record as the information for a debutant is typically limited. If the secondary market corrects, there’s no reason why recent debutants will not take a hit as well,” said Pranav Haldea, managing director, Prime Database. 

He added that after listing, performance of a company also depends on how it is priced during the IPO stage. “Valuations do get stretched a bit during good times, something the investors need to be mindful of during investing,” Haldea added. 

Source: PRIME Database

Companies raised nearly Rs 310 billion by way of IPOs this year. The largest issues this year were that of Bandhan Bank, Hindustan Aeronautics, ICICI Securities, HDFC Asset Management and Varroc Engineering. Bandhan (up 25 per cent) and HDFC (24 per cent) are the ones trading in the green. 

The top gainers among this year’s debutants include Fine Organic Industries (40 per cent), Mishra Dhatu Nigam (31 per cent) and Rites Ltd (31 per cent).

The data looks dismal over a longer term horizon as well, with nearly 50 per cent of the 115 companies listed since 2013 trading in the red. 

The biggest losers include Ortel Communications and Adlabs Entertainment, which are down more than 90 per cent since listing in 2015. 

Other major losers are CL Educate, Inox Wind and HPL Electric & Power, all of which have shed more than 70 per cent since listing. 

“There are times when there is high interest in an IPO and that in turn brings in more investors, leading to a herd mentality and driving up prices after listing. The high prices and high liquidity could lead to a situation where the stock suffers when the market corrects 5-10 per cent,” said Girish Jain, director, KJMC Corporate Advisors. 

The best performers during this period include Teamlease Services (up 190 per cent over the issue price), Avenue Supermarts (372 per cent) and V-Mart Retail (869 per cent). 

More than three-fourths of the amount garnered through initial public offerings over the past few years are share sales by existing investors, including promoters, private equity and venture capital funds.