18 of top 30 IPOs underperform Nifty 500, 8 deliver negative returns: Capitalmind

Financials have traditionally led public market fund-raising, with 27 percent of funds raised in 2024 coming from the sector.

18 of the top 30 IPOs have underperformed the Nifty 500 since their listing, a recent study by Capitalmind Financial Services found.

The finance advisory firm studied the top 30 IPOs by offer size to compare the returns for investors who bought at the IPO price and held the stocks, against the Nifty 500 index. This includes the impact of dividends and assuming they were reinvested in the stock.

Of the 30 that were studied, eight IPOs have delivered negative returns, wiping off investors' wealth. Out of the top 10 IPOs, only two issues have outperformed the Nifty 500 index.

The first, Coal India has merely doubled its price over 14 years after seeing bouts of high volatility. When dividends are considered, Coal India just about manages to eke out gains in excess of the index's returns.

In comparison, Zomato has delivered significant returns in excess of the Nifty 500. Since its listing, the food delivery aggregator has given returns of 265 percent. During the same time, the Nifty 500 index has gained around 76 percent.

Five on of the top 10 IPOs are from the last two years. Most of them have done well, including
Bajaj Housing Finance, Bharti Hexacom, and Brainbees (First Cry), as a result of the bullish market sentiment.

Among the top 30, other big winners include Hindustan Aeronautics, Indian Railway Finance Corp, Sona BLW Precision Forgings, and ICICI Lombard.

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Anoop Vijaykumar, Investments & Head of Research, Capitalmind Financial Services said, “Overall, big IPOs have struggled to deliver excess returns for the investors. IPOs abound in bull markets since they get optimistic valuations and most late-stage bull markets are characterised by a few large IPOs which tend to be valued optimistically."

He added that when the earnings growth to justify those valuations does not materialise combined with a mean-reversion in broader markets, high-profile IPOs end up delivering lower than expected returns.

Financials have traditionally led public market fund-raising, with 27 percent of funds raised in 2024 coming from the sector. However, Consumer companies have taken the top spot in 2024, accounting for 34 percent of the funds raised. Industrials followed with 14 percent.

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