After a certain stage in their life cycle, companies usually need to raise funds or let the early investors in the company cash out their investments. To do this, they go public via Initial Public Offerings (IPOs). This is an opportunity for public investors to put money in promising, and often young companies. Both institutional and retail investors tend to invest in IPOs for long-term as well as listing gains.
In the past three months, 30 mainline companies have gone through an IPO and have listed on the bourses with an average listing gain of 28%. The overwhelmingly positive IPO listing numbers attracts more investors. All the IPOs over the past three months have been oversubscribed, with more than 80% of them subscribed over 10 times of available shares.
Today, we take a look at the performance of IPOs since December 2023. You can find the complete data for all the mainline IPOs in the table below:
Juniper Hotels, the biggest IPO of the past three months, lists at an 11.5% premium
Mainline IPOs raised approx Rs 20,400 crore from public offerings. Out of all of the IPOs, 8 had issue sizes above Rs 1,000 crore. Juniper Hotels, a hotels company, being the largest IPO, had an issue size of Rs 1,800 crore. It was followed by Entero Healthcare Solutions (healthcare services provider) and Inox India (general industrials company) with issue sizes of Rs 1,600 crore and Rs 1,459.3 crore respectively.
Juniper Hotels is the biggest IPO with an issue size of Rs 1,800 crore
Small size, big returns: Vibhor Steel Tubes gives the highest return
Despite being the smallest mainline IPO with an issue size of Rs 72.2 crore, the iron and steel products manufacturer, Vibhor Steel Tubes had the highest listing gains, debuting at a 195.5% premium. However, it has since fallen and is currently trading 73.5% higher than its issue price as investors cash out.
BLS E-Services, a commercial supplies and services company, listed at a premium of 171.1% and is currently trading 129% higher than its issue price.
Azad Engineering currently outperforms its listing price
Motisons Jewellers (gems and jewellery company) and Azad Engineering (industrial machinery company) are listed at a premium of 88.3% and 29.3%, respectively. However, these two companies have gained sharply post-listing, and are currently trading at 140% and 131.3% higher than their respective issue prices.
Nine mainline IPOs in the past three months disappoint, list at a discounted price
Even though most IPOs’ performed well, 9 of the 30 listed IPOs were at a discount.
J G Chemicals listed at a discount of 16.4%
Specialty chemicals company, J G Chemicals, was the least successful IPO, listing at a disappointing 16.4% discount and is currently trading 13.3% lower than the issue price. EPack Durables (consumer electronics company), Muthoot Microfin (finance company), and Capital Small Finance Bank (bank) are among the top losers, currently trading below their issue price. They have lost 29.1%, 30.7%, and 28.6% respectively, from their issue prices.
Most of the companies that listed at a discount have further extended their losses, while three companies that debuted at a premium have pared their gains and are currently trading below their issue prices.
Credo Brands pares gains, trades lower than issue price
Happy Forgings (general industrials company) was listed at a premium of 21.3% but is currently trading at a 2.7% discount to its issue price. Similarly, Credo Brands Marketing (retailing) and GPT Healthcare (diversified consumer services) were listed positively but since listing, have led to investors losing 33.4% and 9.8% of their application amount.
All IPOs in the past three months were fully subscribed
Out of 30 IPOs, 25 were subscribed more than 10 times, while all the IPOs have been fully or over-subscribed. Vibhor Steel Tubes being the smallest mainline IPO in the group, raised Rs 72.2 crore via a fresh issue of 48 lakh shares. It was oversubscribed 298.9 times. It was followed by BLS E-Services and Motisons Jewellers, which were subscribed for 162.5 and 159.6 times their issue size.
Vibhor Steel Tubes gets subscribed 298.9x
Amongst the least subscribed IPOs were Entero Healthcare Solutions, Juniper Hotels, Capital Small Finance Bank, GPT Healthcare, and Gopal Snacks (packaged foods company), all of which had subscription rates below 10 times their available shares.
Recent numbers show a correlation between listing prices and subscription rates
Retail investors tend to invest in IPOs with high subscription rates as they believe there is a correlation between that and listing gains. Is that actually the case? The chart below can help us clarify this..
The most subscribed companies delivered highest listing gains
Vibhor Steel Tubes, with the highest subscription rate, has the highest listing gains, while India Shelter Finance Corp (housing finance company) has a lower subscription rate as well as a low listing gain. Even though the trend between listing gains and subscription rates is not exactly the same, one can observe a strong correlation between them.
However, the correlation between subscription and listing rate drops where the subscription rate is lower. J G Chemicals listed at a discount of 16.4%, while it was subscribed 27.8 times. On the contrary, Juniper Hotels is listed at a premium of 11.5%, while it was just subscribed 2.1 times.
All companies from the general industrials sector listed at a premium
The 30 companies that were listed in the past three months were from 17 sectors. We can draw some observations from the sectors with multiple listings. The average listing rate of the banking and finance sector is -4% with three companies listing at a discount and one at a premium. All the companies from the general industrial sector listed positively with an average listing gain of 31.1%. The commercial services and supplies sector’s average gain was 80%.
The banking & finance sector had 4 IPOs listing at an average of -4%
However, one cannot always depend on sectoral averages. For instance, diversified consumer services had varied listing gains for each company, although it had an average listing gain of 3.4%. Entero Healthcare Solutions is listed at a discount of 8.6%, while Medi Assist Healthcare Services is listed at a premium of 11%.
While investing in an IPO, one should consider its subscription rate, but it is only one of the variables. There are many other factors, such as valuation, market conditions, financial stability, as well as broader risks that may affect the listing price of a company. Similarly, it is not necessary for a company to list at a premium just because it belongs to a certain sector. Investors should conduct thorough research before making a decision to invest.