Six of 8 IPOs of 2019 see dream run in a weak market, now face acid test

Economic Times

The IPO market has been going through a rather dry spell this year. 

NEW DELHI: Shares of most companies that got listed in Calendar 2019 are trading above their issue prices, when 80 per cent of the broader market is trading in the negative zone on a year-to-date basis amid trade war jitters and Budget disappointments. 

Out of the eight companies that debuted during the year, only two – Xelpmoc Design & Tech and MSTC – are trading below their issue prices as on date. 

“Till this date in 2019, many IPOs have done considerably well. While the market has been moving sideways, IPOs that hit the market so far in 2019 have gained between 12 per cent and 61 per cent,” said Mustafa Nadeem, CEO, Epic Research. 

Xelpmoc Design and Tech, which git listed on February 4, 2019 at an issue price of Rs 66, is down nearly 8 per cent. 

Chalet Hotels, which got listed on February 7 at an issue price of Rs 280, was up 13 per cent as of Tuesday’s close. However, MSTC, which was listed on March 29 at an issue price of Rs 120, is down 24 per cent. 

Rail Vikas Nigam debuted on April 11 at an issue price of Rs 19 and has gained 25 per cent so far, while MetropolisNSE -1.86 % Healthcare, which got listed on April 15 at Rs 880, is up 19 per cent. Polycab India got listed on April 16 at an issue price of Rs 538 and is up 12 per cent. Neogen Chemicals, which was listed on May 8 at an issue price of Rs 215, is up 61 per cent while IndiaMARTNSE 2.64 % InterMESH, listed on July 4 at an issue price of Rs 973, is up 24 per cent. 

Analysts says while the six stocks have had an impressive run so far, their real test will begin now after the quarterly numbers are out and investors start comparing them vis-à-vis peers. 

“It would be crucial for them in the coming months one the earnings come out. Discounting would take a toll in share prices,” Nadeem said. 

He believes Polycab India and Neogen Chemicals, with good earnings visibility and business growth, can prosper and appreciate in a sideways market. 

At a time when the market has been witnessing a carnage in midcaps and smallcaps, what made these companies stay up? 

“Most IPOs of Calendar 2019 were adequately priced, and that is why they delivered gains,” said Arun Kejriwal, Founder at Kejriwal Research & Investment Services. 

“I don’t expect any negative surprises from them at least for the next few quarters as their businesses are not new or unique to the market,” he said. 

The IPO market has been going through a rather dry spell this year. Only eight companies have floated IPOs in the first six months, raising Rs 5,509 crore, compared with 24 that raised Rs 30,960 crore in the year-earlier period. 

However, this is likely to change as half a dozen companies are waiting to hit the market next month or so to raise about Rs 10,000 crore. 

Sterling and Wilson Solar, ASK Investment Managers, Spandana Spoorthy Financial, Affle India, AGS Transact Technologies and Mazagon Dock Shipbuilders among others are conducting roadshows and planning IPOs by the middle of August, say bankers.