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IPO-bound firms see correction in unlisted market

In 2021, 63 Indian corporate entities have raised Rs 1.19 trillion via IPOs with most firms reporting healthy gains on debut

December 27, 2021 / 11:40 AM IST

After many companies failed to deliver positive returns on their stock market debut, several IPO-bound companies’ shares have dropped in the so-called unlisted market, where securities are bought and sold before they are officially traded.

For instance, shares of PharmEasy parent API Holdings Ltd which filed draft initial public offering (IPO) papers with Securities and Exchange Board of India (SEBI) in November, have lost nearly 21% from their October highs.

The stock is currently trading at Rs 107 a share, down from Rs 135 earlier.

Likewise, Le Travenues Technology Ltd, the operator of travel platform ixigo, has declined 19% from its October high in the unlisted market.

The stock is currently trading at Rs 195, down from Rs 240 a share. The firm filed its draft IPO papers with Sebi in August.

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Shares of One Mobikwik Systems Ltd. fell 33% to Rs 900 from its recent high of Rs 1,350 a share. The firm filed draft IPO documents with the regulator in July. Both Le Travenues Technology and Mobikwik have received SEBI approval for IPOs.

Also Read: Amidst market volatility, here’s how you can invest Rs 10 lakh now

Unlisted shares of Tamilnad Mercantile Bank Ltd, Sterlite Power Transmission Ltd, AGS Transact Technologies Ltd, Reliance Retail, HDB Financial Services and Chennai Super Kings have lost between 15% and 60%.

Shares-in-unlisted-market (3)

Dampening sentiment

“The shake-off in the broader market is adding pressure on the unlisted market, as many IPO-bound unlisted stocks have retraced from their highs. Recently, many IPOs that failed to perform on listing day also dampened sentiment among investors,” an analyst tracking the unlisted market said on condition of anonymity.

Domestic as well as global equities markets are in a correction phase amid worries on inflation and spreading cases of Omicron, the latest variant of Covid-19. Continued selling by foreign investors in the domestic market have also worried investors.

The Sensex hit an all-time high of 62,245.43 on October 19 while the Nifty 50 climbed to a record 18,604.45 on that day. Since then, the Sensex has lost 5,121.43 points, or 8.23 percent, while the Nifty eased 1,601.45 points, or 8.61 percent.

Profit booking

“The new entrant in unlisted space, API Holdings, which is being traded with heavy volumes, has cooled off. Also, stocks like Reliance Retail, HDB Financial Services, and Chennai Super Kings which are all-time favourite stocks of the unlisted market, have slumped from recent highs. This fall can be attributed to profit booking because most of these counters had significantly outperformed the market in a very short span” said Manan Doshi, co-founder of unlistedarena.com, which buys and sells shares of unlisted companies.

In 2021, 63 Indian corporate entities have raised Rs 1.19 trillion via IPOs with most firms reporting healthy gains on debut. A few firms recently listed with negative or flat returns which analysts say was due to stretched valuations and lack of meaningful fundamentals. This led huge losses for high networth investors.

Metro Brands Ltd, Shriram Properties Ltd and RateGain Travel Technologies Ltd debuted at a nearly 20% discount while Anand Rathi Wealth Ltd, Star Health and Allied Insurance Co. Ltd, Tarsons Products Ltd and Sapphire Foods India Ltd received a tepid response on their market debut. Paytm Owner One97 Communications, which raised Rs.18,300 crore in India’s biggest IPO, fell nearly 27% from its issue price on its trading debut.

“Investors should take more precautions while buying in unlisted markets. Also we recommend reading the DRHP fully and taking cognizance of the valuations before taking a call on IPOs,” said Aditya Kondawar, chief operating officer of JST Investment.
Ravindra Sonavane
first published: Dec 27, 2021 11:34 am
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