Over half the stocks that debuted in FY22 trade below listing-day close

The sharp correction in equity markets over the past few months has dealt a body blow to some of the stocks that debuted at the bourses in fiscal 2021-22 (FY22). A total 54 companies have mopped up nearly Rs 1.2 trillion thus far in FY22 from the primary market. Of these, stocks of 32 companies (60 per cent) are trading below their listing day close price with stocks of Nidan Laboratoris & Healthcare, Cartrade Tech, Aashka Hospitals, Sigachi Industries, One 97 Communications (parent company of Paytm) and Fino Payments Bank suffering the most with a fall of up to 65 per cent, data show. 

New-age tech and food delivery companies such as PB Fintech, Zomato, FSN E-Commerce Ventures (parent company of Nykaa), too, have lost 31 per cent to 45 per cent from their listing-day closing price. The fall from their 52-week high price has been sharper with all the 54 stocks slipping 16 per cent to 65 per cent.

“I think a number of IPOs were priced very aggressively and there were valuation concerns in some. It left nothing much on the table for investors post their listing. That said, we cannot paint the entire set with the same brush and generalise this. At the fundamental level, there were issues regarding the business models of some fintech companies but somehow got away with listing. Among the lot, there are companies that will eventually turn profitable and grow,” explains Devarsh Vakil, deputy head of retail research at HDFC Securities.

SEE TABLE: THE DEBUTANTE BALL: How IPOs have done in FY22

Macrotech Developers, Barbeque Nation Hospitality, Sona Blw Precision Forgings, Adani Wilmar, Paras Defence & Space Technologies and Devyani International are some of the stocks that still trade 31 per cent and 177 per cent higher when compared to their listing-day close price, data show. The BSE IPO index, a gauge of performance of newly-listed companies on the BSE, has moved up nearly 29 per cent thus far in FY22 as against 17 per cent rise in the S&P BSE Sensex during this period.

Despite the likelihood of an aggressive rate hike by the US Federal Reserve (US Fed), a correction in equity markets, analysts expect the primary market action to stay on track, albeit a minor hiccup caused by these near-term headwinds. 

“If a Fed tightening cycle can delay the much anticipated listings of some of India’s many unicorns, it will not end it. The arrival of a growing number of quoted digital plays is clearly coming, which will add another dimension to the stock market. Attention is now focused on the assumed pending IPO of LIC, which has the potential, at least, to become the biggest stock in the market. All of the above means that the profile of India’s stock market globally is only likely to grow,” wrote Christopher Wood, global head of equity strategy at Jefferies in a recent note.

That said, with the IPO of LIC round-the corner, analysts expect the secondary market liquidity to start getting sucked as the money gets lined up for the mega offering. However, they expect normalcy to resume soon after the state-owned insurer debuts.

“LIC's IPO is a behemoth and can suck out around Rs 65,000 crore from the system. But that will be temporary and I expect normalcy to resume (as regards the available liquidity) within a month after LIC's listing,” said R Venkataraman, chairman IIFL Securities.