It's a green 2020 for IPOs: All 14 listings are trading above issue price

Calendar year 2020 (CY20) will go down as one of THE BEST for investors in Initial Public Offers (IPOs). Burger King India on Monday became the 14th company to get listed this year following a public issue. And, just four of the 14 stocks saw their price slip below the IPO price on listing day.

However, thanks to the buoyancy in the secondary market shares of all the 14 companies are currently trading above their issue price.

In terms of listing day performance, Burger King has toppled Happiest Minds Technologies with gains of 131 per cent. The latter saw its shares soar 123 per cent on debut, but are currently up 93 per cent over their issue price.

In terms of issue-to-date returns, Route Mobile fares the best, with gains of 217 per cent over the issue price. Route Mobile, Rossari Biotech, and Chemcon Speciality Chemicals saw their stock price surge over 70 per cent during their respective stock market debuts.

Whenever a company’s stock performs poorly upon listing, investment bankers are blamed for pricing it aggressively. Similarly, when the stock generates stellar returns on debut—as in the aforementioned companies — investment bankers get the flak for underpricing.

V Jayasankar, senior executive director and head of equity capital markets, Kotak Investment Banking, says the huge listing day pop is partly because of technical factors.

“Typically, we price IPOs based on investor feedback. The pricing has to be a balance between what the issuer wants and what the investors are willing to pay. At present, there is huge amount of liquidity chasing stocks, particularly in the consumer and technology sector. The issue sizes for most recent IPOs have been below $200 million. As a result, we have this technical factor where flows are high but amount of shares available are low. Also, a large portion of the shares allotted in the IPO are with anchor investors.”

Shares allotted to anchor investors are locked in for 30 days.