Initial public offerings trade above issue prices this year
NEW DELHI: The primary market has emerged as the cash cow for investors in 2019, amid high volatility in the secondary market, as 70% of the new entrants are trading well above their issue prices, giving returns of up to 95% to shareholders.
Several factors including trade conflict between the US and China, slowdown in the economy, poor investor sentiment and pullout of funds by foreign investors have kept the market volatile, experts said.
They further said that despite the volatility, there is always demand for good initial public offerings (IPOS).
Out of 11 companies that got listed in 2019, as many as eight have registered smart gains ranging from 7 to 95% against the price at which they had issued shares to investors; while the remaining three firms have failed to attract investors and are quoting below their issue price, an analysis of the stock performance of the newly listed firms as of October 4 showed.
INDIAMART INTERMESH, which made its stock market debut in July, has seen the steepest rally in its share price and is trading 95% higher than the IPO price on BSE. This is followed by Neogen Chemicals that has provided 76% return.
The public offers of Affle (India) Ltd and Metropolis Healthcare have given smart returns to their investors soaring about 49 and 40%, respectively.
Besides, Polycab India, Rail Vikas Nigam Ltd, Chalet Hotels and Spandana Sphoorty Financial have risen 22%, 21%, 12% and 7%, respectively, against their issue prices.
In stark contrast, three companies —MSTC, Sterling & Wilson Solar and Xelpmoc Design and Tech—have failed to give positive returns.
MSTC, which listed its shares in March, has seen its shares plummet by 24% and Sterling & Wilson Solar, which made its debut August, has seen its stocks fallen by over 23%.
Besides, shares of Xelpmoc Design and Tech dropped by 4.5% against its issue price.
“Over the past one year, markets have not been upbeat due to several factors so there has been a negative sentiment among investors. In such a situation, IPOS are very well priced, giving good opportunity to investors. However, when markets are upbeat, IPOS are generally very aggressively priced,” said Narendra Solanki, head of Fundamental Research at Anand Rathi Shares and Stock Brokers. Another reason could be some of these companies have clean book, which are attracting investors, he added.
Arindam Chanda chief executive at IIFL Securities said, “while stock price is subject to various factors, there is always demand for quality papers”.
The BSE’S benchmark Sensex, which has seen a highly volatile trend, has gained over 4 per cent so far this year.