The Indian IPO market typically slows down in the six months before the Lok Sabha elections. But 2023-24 has bucked the trend due to increased market confidence, and greater certainty around the election result – most analysts predict a comfortable win for Prime Minister Modi and the BJP.
In the last six months alone, 49 companies have collectively raised Rs 41,000 crore via the IPO route, according to Trendlyne’s IPO dashboard. As interest rates remain high, many companies are going public to fund their operations and growth. The market’s recent track record of strong listing gains has also drawn investors to IPO offerings.
But if there is a suspiciously loud party happening, authorities tend to sit up and notice. In the case of IPOs, it’s the SEBI regulator. On March 11, SEBI Chairperson Madhabi Puri Buch expressed concerns about manipulation in the Small and Medium Enterprises (SME) segment of the capital markets, and the possibility of over-stretched valuations.
In this edition of Chart of the Week, we take a look at Trendlyne’s IPO Dashboard to analyse top-performing and worst-performing mainline and SME IPOs in terms of current gains/losses, along with their listing gains/losses in the past six months.
BLS E-Services & Tata Technologies saw the biggest listing gains, but have fallen since
BLS E-Services is a digital service provider that offers services to major banks in India, assisted e-services, and e-governance services at the grassroots level. This company gavestellar listing gains of 171% over its issue price, but has fallen since. It is currently trading at 141% over its issue price.
Operating primarily in the automotive space, Tata Technologies is an engineering and R&D company. It listed on the bourses on November 30, 2023, with gains of 163%. It currently trades at a premium of 110% over its issue price. Profit booking by investors looking for IPO gains and a high valuation gap (at the time of listing) compared to its peers have contributed to this decline. Its offer for sale of 609 lakh shares was oversubscribed by 69 times.
IREDA, Motisons Jewellers, and Azad Engineering are the best performers overall
The top performer among mainline IPOs is the Indian Renewable Energy Development Agency (IREDA) which listed at a premium of 88% and is currently trading at 302% above its issue price. This financial institution plays a strategic role in the government’s renewable energy initiative. With an issue size of Rs 2,150 crore, it was oversubscribed by 38.8 times and listed on the bourses on November 29, 2023.
Motisons Jewellers and Azad Engineering also lead the pack in terms of current gains after listing at a premium of 88% and 29% respectively. Both companies raised capital to reduce their debt obligations and fund working capital requirements.
For the top-performing SME IPOs, the sky seems to be the limit
Goyal Salt raised Rs 18.6 crore to invest in product quality and marketing. Its fresh issue of 49 lakh shares was oversubscribed by 267 times. The company listed at 258% premium and is currently up 318% from the issue price.
Leading the pack in the SME segment is Trident Techlabs with current gains 483% above its issue price. The company listed on the exchanges on December 29, 2023, posting stellar listing gains of 194%. This SME is involved mainly in engineering and power system solutions. The company raised Rs 16 crore with a fresh issue of 46 lakh shares mainly to fund its working capital requirement. Trident’s IPO was oversubscribed by 502 times.
Australian Premium Solar (India) specialises in manufacturing solar panels and provides end-to-end solutions for residential, agricultural, and commercial applications. The company posted listing gains of 172% and currently trades 286% above its issue price. Its fresh issue of 52 lakh shares was oversubscribed by 432 times listed on the bourses on January 18, 2024.
SAR Televentures, with a listing gain of 100% over its issue price, focuses on installing and commissioning 4G and 5G towers, Optical Fibre Cable (OFC) Systems, and dealing in network equipment. The company raised Rs 24.8 crore to support its provisions and install 4G and 5G towers. The stock currently trades at a premium of 275%, after listing 101% over its issue price.
With plans to set up a manufacturing facility, Amic Forging raised Rs 34.8 crore. Their fresh issue of 28 lakh shares was oversubscribed by 269 times. The stock listed on the bourses on December 6, 2023, at a premium of 99%, and the company is currently trading 390% above its issue price. As the name suggests, the company specialises in manufacturing forged components catering to various industries.
Credo Brands and Vrundavan Plantation trade at steep discounts post-listing
Worst performers among SMEs sink deeper than mainline
After looking at the top-performing IPOs, let’s take a look at mainline and SME IPOs which are trading at deep discounts to the issue price.
Credo Brands Marketing raised Rs 550 crore via an offer for sale (OFS). The company’s promoters were looking to exit. Its offer for sale of 196 lakh shares was oversubscribed by 52 times. On December 27, 2023, the company posted a moderate listing gain of 12%. However, the company is currently trading 37% below its issue price as investors booked profits after listing.
Capital Small Finance Bank started operations as India’s first small finance bank (SFB) in 2016. The company has a strong presence in semi-urban and rural areas with a branch-based operating model. It intends to use the proceeds from the fresh issue to strengthen its capital base and fulfil future capital needs. The SFB listed at a discount of 7%, and currently trades 28% below its issue price.
Suraj Estate Developers has been in the real estate business since 1986, developing properties in both residential and commercial sectors in South Central Mumbai. The company raised Rs 400 crore via a fresh issue to settle debt obligations, and acquire land and development rights. The stock is trading 20% below its issue price, after listing at a discount of 7%.
Muthoot Microfin is a microfinance institution that offers small loans to female customers, particularly in rural areas of India. Muthoot Microfin raised Rs 960 crore through a combination of fresh issue and OFS. The company will use the net proceeds from the fresh issue to strengthen its capital base and fulfil future capital needs. The company listed at a discount of 9% and currently trades 30% below the issue price.
Consumer electronics company EPack Durables is the second-largest room air conditioner original design manufacturer in India in terms of the number of units manufactured in FY23. With a promoter holding of 42.6% post-IPO, the company listed at a discount of 10% to its issue price and currently trades 30% lower than its issue price.
Worst-performing SME IPOs lose half their value
When looking at the best and worst performing SME and Mainline IPOs, one thing stands out: high risk equals high rewards. SME IPOs tend to have higher listing and current gains, but also have the worst listing and current losses.
Some SME IPOs have already lost nearly half their value since listing. Investors need to do their due diligence on IPOs, especially during a rising market, when the companies tend to make use of the positive sentiment in the market for listing.
Vrundavan Plantation is mainly engaged in the nursery business, and stands out as the worst-performing IPO. It has declined 61% below its issue price after listing at a discount of 6% on November 6, 2023. The company raised Rs 15.3 crore for the repayment of its working capital and unsecured loans. Its fresh issue of 14 lakh shares was oversubscribed by 18 times. However, the issue had not garnered any subscriptions from qualified institutional investors.
Advertising and media company Graphisads raised Rs 53.4 crore mainly for repayment of provisions and to meet working capital requirements. After listing at a moderate discount of 4.6%, the company currently trades 54% below its issue price.
Meanwhile, Italian Edibles with its wide range of confectionery foods under its OfCour’s brand has two manufacturing units in Indore. The company has raised Rs 26.7 crore proposing to set up another manufacturing unit and repayment of borrowings. The company trades at a discount of 48% below its issue price.
Vivaa Tradecom is trading at a discount of 49% to its issue price. The company is mostly engaged in the apparel and accessories business. It listed at a discount of 17% on October 12, 2023.
Lastly, sugar company MVK Agro Food Product listed on the bourses at a discount of 31%, and went further down, currently trading at a discount of 47% below its issue price. The company raised Rs 66 crore to set up a greenfield unit for manufacturing ethanol, and generation and bottling of Bio-CNG and fertiliser.
