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What’s more, most of the PSUs have performed badly since their respective listings, with New India Assurance being the worst performer among the PSU IPOs.
Shares of about half of the companies that launched their initial public offerings (IPOs) since 2016 have been trading below their offer prices despite both the broader indices — Sensex and Nifty — yielding 51.1% and 48.5% in returns in the past three years.
Data analysed by FE showed 44 of the 95 companies that got listed since 2016 are trading below their offer prices. Of these 44, 37 have given negative returns in double digits, according to Prime Database. “In the recent past, issues have been priced aggressively, which has been an overhang on stock after listing. Poor performance of mid & small caps is also a reason why some IPOs have not done well,”said Rajiv Singh, CEO-stock broking, Karvy.
S Chand and Co, CL Educate, HPL Electric and Power, Precision Cramshafts, GTPL Hathway and New India Assurance lead the list of wealth destroyers, losing up to 88.3% since their listing. FE had earlier reported that the stock markets have given education sector a thumbs down. “There is quite often a frenzied approach to IPO promotion by those who promote such issues. This approach itself drives quite a large number of investors to book profits and exit once they see some premium. Their intention was never to stay invested. Thus, by itself pulls down the stock prices,”said K Joseph Thomas, head of research at Emkay Wealth Management.
What’s more, most of the PSUs have performed badly since their respective listings, with New India Assurance being the worst performer among the PSU IPOs. “We believe the divestment plan of Rs 70,000 crore has to be re-thought as the continuous sell-down through the ETF route has impaired fair value of strategic PSU companies,” said a brokerage house. According to Value Research, CPSE ETF has yielded only 0.45% in returns in the last five years. Interestingly, in FY19 PSUs dominated the buyback offers which was one of the divestment methods. “On account of the large issuance in the secondary markets, the primary market may remain subdued for a while. This means that only high quality issuers are likely to be able to raise funds via an IPO,” added Rajiv Singh.
In contrast, companies that have been listed in 2019 so far have given positive returns, in double digits. The last three companies that got listed this year include Polycab India, Neogen Chemicals and Indiamart Intermesh.These three listed companies having given 11.8%, 53.6% and 38.39% in returns against their respective offer prices.