IPOS – PAST AND PRESENT
cautioning about IPOs. He is the first generation in his family to enter primary markets and believes he can’t go wrong with new issues. “I’ll apply in all IPOs. I’m sure I’ll get some allocation in at least a few of them. If not, I can always buy on the listing day and sell to make a profit the next day, like I did in DMart,” he says. Such naivety reminds one of the reckless behaviour of retail investors and aggressive behaviour by punters just before the 2007/08 financial crisis.
Investors are looking at the rear view mirror and investing ahead, say experts. Spectacular past returns ensure a liking for all IPOs. In 2008, it was RPower that ended the IPO boom when it tanked after listing. Which company will do it this time? Not that everything is hunky dory in this market. Even in this bull run, there are companies that are showing a performance drag. Coffee Day Enterprises Ltd, which listed in October 2015, is down 25 per cent from its issue price. Inox Wind, Ortel Communications Ltd and Adlabs Entertainment Ltd, which listed in March 2015, are down over 55 per cent, while Quick Heal Technologies Ltd has posted a negative return of 30 per cent since its listing in February last year. S. Chand and C. L. Educate, which listed in March and April, respectively, are also trading below their issue prices; they have given negative returns of 17 per cent and 20 per cent, respectively.
“IPOs should not be put on a pedestal. Besides, why treat all IPOs as homogenous? The decision to invest should be based on disclosures, track record, management and pricing,” says a bullish Haldea. With allocation to retail investors capped at 35 per cent and gush of liquidity, the demand–supply dynamics play out and benefits investors, he says.
Jaysankar says this frenzy will even out the demandsupply gap. “With half-a-dozen large IPOs hitting the market, a lot more allotment will take place, new pools of money will come in, and global accounts will participate by investing in marquee companies about to fl oat. This could change the dynamics of the paper supply and the