Calendar year 2019 (CY19) has turned out to be a good year for those who invested in equities via the primary market route with most of the new listings outperforming the S&P Sensex. As many as 92 per cent of the stocks of companies that listed in 2019 are trading well above their issue price and have given a return of over 200 per cent.
Among individual stocks, investors in four new listed companies – Indian Railway Catering and Tourism Corporation (IRCTC), IndiaMART InterMESH, Affle (India) and Polycab India – have doubled their money post their stock debuted at the exchanges. While the S&P BSE IPO index has surged 35 per cent in CY19, the benchmark S&P BSE Sensex has gained around 12 per cent during this period. S&P BSE Smallcap and S&P BSE Midcap indices, on the other hand, have slipped 10 per cent and 5 per cent, respectively.
“There will always be an appetite for good quality issues that are reasonably priced. That’s what has played out in select public offerings in CY19. Going ahead, too, such issues will find takers. The government’s divestment agenda can succeed if issues are priced attractively. As regards investors, they should look for niche businesses with good growth and earnings prospects before investing in the primary market,” says G Chokkalingam, founder and managing director at Equinomics Research.
And the data does prove this theory. For instance, the stock of Indian Railway Catering and Tourism Corporation (IRCTC) – a government-owned company in the railway ticketing and catering business – has soared 202 per cent to Rs 981 as against its issue price of Rs 320 per share. Currently, the scrip is quoting at Rs 867 on the BSE. Shares of Polycab India – a fast moving electric goods company – hit a new high of Rs 1,091 on December 5. The stock has zoomed 103 per cent from its issue price of Rs 538 per share.
Of the 13 companies that got listed in 2019, eight have outrun the IPO index by gaining over 38 per cent against their respective issue price. Four have gained in the range of 8 per cent to 19 per cent from issue price. Sterling and Wilson Solar, the sole company in this category, has failed to give a positive return and is trading 65 per cent lower on the BSE. Except, Sterling and Wilson Solar, the remaining 12 companies that raised Rs 8,362 crore through IPOs in 2019 are currently valued 50 per cent higher at Rs 12,581 crore.
Ambareesh Baliga, an independent market expert also shares the same opinion and says investor are lapping up offers that are attractively priced and offer value to investors from a medium-to-long term horizon.
“Issues that are attractively priced will always find takers. Mid-and small-cap segment as a whole has suffered a lot due to a change in definition in 2018. Some of the good quality stocks were collateral damage. Going ahead, such stocks that saw a sharp decline and the mid, small-cap segment as a whole should do well,” Baliga says.
|Company / Stock||Issue Price||CMP||% gain|
|Ujjivan Small Finance Bank||37.00||56.00||51.4|
|Rail Vikas Nigam||19.00||23.40||23.2|
|CMP = current market price on BSE in Rs at 10:43 am on Dec 12|
|Compiled by BS Research Bureau|