A flurry of initial public offerings (IPOs) have hit the market in the previous two financial years. These listings, which happened amid much fanfare, failed to live up to their promise instead, generating heavy losses for investors who had bet on them.
Of the 161 IPOs which hit the Street in FY23, raising an aggregate Rs 50,514 crore, 63 returned losses to investors. Those giving more than 100% returns were just 24, while the remaining 74 gave between 10% and 99% returns, according to Bloomberg data.
Also Read: Govt kickstarts IREDA IPO process, scouts for merchant bankers
A senior executive of a PMS firm, who didn’t wish to be named, said that most of the major IPOs were of those companies that got listed way too early. “These companies were not exactly profitable, but were in a rush to give their investors an exit. The high valuations they got listed at eventually caught up with them, and the market lost faith.”
LIC, which listed at Rs 949, was tipped to be the blockbuster IPO of FY23, raising Rs 20,557 crore. The stock closed FY23 with a loss of 43.7% from its offer price, and was trading at Rs 549.15 as of Monday, still down 42% from its issue price.
The picture for One97 Communications, the parent entity of Paytm, is much more grim. The fintech giant raised Rs 18,300 crore, in what was the biggest IPO of FY22. At the end of that financial year, however, the stock was 75.4% below its offer price of Rs 2,150. As of Monday, it was trading at Rs 655.20, almost 70% down from its offer price.
According to Deven Choksey, promoter of KRChoksey Group, the major problem with these companies is that there was a gross disconnect between them and investors in terms of communication.
“These firms failed to communicate effectively with investors, especially when there was a host of IPOs hitting the market, which is why a negative perception took shape. Further, there was a lack of awareness among investors regarding these companies and their plans,” he said.
Having recorded revenue of Rs 1,574 crore as of the December 2022 quarter, Paytm registered a net loss of Rs 436 crore, with a negative EPS of Rs 7.
Also Read: Sequoia Cap looking at partial exits
Delhivery, the second-biggest listing of FY23, raising Rs 5,236 crore, was 32% below its issue price of Rs 487 as of March 31. As of Monday, it was 33% down compared to the offer price, at Rs 328.10. The company recorded a net loss of Rs 166 crore and a negative EPS of Rs 2.24 as of December 2022, despite raking in revenues of Rs 1,683 crore.
A senior investment banker tracking equity capital markets said that broadly, two factors affected these companies’ stocks.
“The post-IPO performance of these firms failed to click with investors, who got fatigued and lost patience. The bigger issue was, that many of these IPOs had significant FII holdings, who were structurally underweight on India, and their sell-off had a huge bearing on these stocks,” he pointed out.
FIIs withdrew a net $17 billion in FY22, and $6 billion in FY23, according to Bloomberg data.
Among the other major listings of FY23, Global Health and Rainbow Children’s Medicare were up close to 57% and 35% respectively as of FY23-end, while Kfin Tech was down 23.4%.
Zomato, the second-biggest listing of FY22 at Rs 9,375 crore, gave a paltry 8% return, while PowerGrid fared better at 34%. Star Health and PB Fintech (Policybazaar’s parent firm) ended FY22 with losses of 21% and 29%, respectively.