Nykaa, Paytm: Recent IPOs down 48% from 52-week high. Should you buy any?

Shares of recently listed companies have been battered badly at the bourses in the recent market correction with some of these counters slipping up to 48 per cent from their respective 52-week high levels.

Among individual stocks, FSN E-Commerce Ventures (Nykaa), PB Fintech - the parent company of Policybazaar, Tega Industries, Tarsons Products, Aditya Birla Sun Life AMC, SJS Enterprises, Indigo Paints, Anand Rathi Wealth and Glenmark Lifesciences hit their respective lows since listing in the past few days. And analysts say the worst may not be over for some of them yet and suggest investors stay away from these stocks for now.

G Chokkalingam, founder and chief investment officer at Equinomics Research, for instance, suggests investors should carefully analyse the business prospects of each of these companies before taking an investment decision. 

"Investors should not rush to buy stocks of these e-commerce companies despite corrections. Typically, private equity / venture funds invest in start-ups and get rewarded when these companies become profitable. Most of the recently listed e-commerce companies are substantially loss-making, but rushed to the markets to raise funds before turning profitable. As a result, retail investors got converted into venture capitalists. Seven out of ten of these stocks are avoidable, and most can correct 20 – 30 per cent more from here on," he said.

Calendar year 2021 (CY21) was one of the most remarkable years for the primary markets where nearly Rs 1.2 trillion was mopped up till early December by 66 companies, beating the previous best of Rs 74,035 crore seen in 2017. 

New-age companies including Paytm, Zomato, and Nykaa raised close to Rs 46,800 crore of this amount, cornering nearly 40 per cent of the fund raise. While Zomato started the trend of new-age firms debuting at the bourses, it was the poster boy of digital payments - Paytm - that launched India’s biggest-ever IPO worth Rs 18,300 crore. Policybazaar, Nykaa, Nazara Technologies, CarTrade Tech, and Easy Trip Planners were some of the other companies that followed suit.

“The current market sentiments have put almost all the IPOs on backfoot and we have seen muted listings on most of them. I think in the current market situation, most of the blue-chip companies with strong balance sheets are available at decent valuations. Investors should look at buying them and can wait for a few quarters more to see the performance of recently listed companies,” said Gaurav Garg, head of research at Capital Via.

Despite the performance of the recent IPOs, CY22, according to analysts, is likely to be another blockbuster year for fundraising via the primary market. Companies from the new-age tech, healthcare, consumer, real estate and specialty chemicals are some of the sectors that can see companies approach the primary markets for raising funds.

"With an IPO pipeline in place of $15 billion filed with Sebi and awaiting launch; and $11 billion likely to be filed in the near-term, we can expect a good share of IPO activity across mid-and large-caps. Fund raising activity will continue to remain buoyant from companies listed in CY20 and CY21 that may come back to raise funds, looking for growth capital, deleveraging to support growth and specific events such as acquisitions, as the world returns to complete normalcy. Overall 2022 would be good for the Indian capital fund raising market,” said V Jayasankar, whole-time director at Kotak Mahindra Capital.