Primary market investors see up to 130% return

Investment in equities via the primary market route in CY19 has made investors rich at a time when the secondary markets have not yielded much return.

As many as 82 per cent of the stocks that listed in 2019 are trading above their issue price and have given a return of up to 130 per cent. In comparison, the benchmark S&P BSE Sensex has gained around 6 per cent during this period, while broader indices — the S&P BSE Midcap and S&P BSE Midcap indices — have slipped 10 per cent and 13 per cent, respectively.

In CY18, less than half, or 42 per cent, of the issues that hit the primary market recorded a positive return. In CY15, it was 55 per cent, followed by 70 per cent in CY16 and 69 per cent in CY17.

Of the 11 companies that listed in 2019, nine have outrun the market by gaining more than 10 per cent against their respective issue price.

MSTC and Sterling and Wilson Solar, however, have failed to give a positive return and are trading lower by 21 per cent and 23 per cent, respectively. “A number of these firms operate in a niche business segment and have a good business model. That apart, the IPO was priced attractively. As a result, not only were the subscription levels good, but the post-listing gains have been healthy,” said G Chokkalingam, founder and MD, Equinomics Research.

Indian Railway Catering and Tourism Corporation (IRCTC) made a stellar debut on the bourses by listing at ~644, translating into a 101 per cent premium against its issue price of ~320 per share on the BSE on Monday. The stock finally ended at ~733, 129 per cent higher than its issue price. It rallied 132 per cent to ~744, in intra-day trade on Monday.

Among the other counters, INDIAMART INTERMESH, which made its stock market debut in July 2019 (the issue price of ~973/share), has seen its price more than double.

“Interest in IRCTC was largely driven by the attractiveness of valuations as demonstrated by the listing gains and may not become a bellwether for things to come in primary markets. IRCTC will help the government divestment to a certain extent as this has disrupted the de-facto assumption that PSU transactions should be avoided,” said Munish Aggarwal, director (capital markets), Equirus Capital.