IPOs of 2020: 4 offerings more than doubled while 9 rose 10-50% from issue price

The year 2020 saw 24 IPOs hitting D-Street, cumulatively raising more than Rs 22,000 crore in the primary market space, amid the COVID-19 pandemic, according to data collated from AceEquity.

India was quick in addressing COVID-related challenges by introducing reforms last year which are now showing results. Companies were also quick to sort out the issues related to cost. Pick up in GST collections as well as other micro triggers point towards recovery in the economy.

The markets recovered swiftly after falling to a three-year low back in March 2020. The liquidity wave managed to lift benchmark indices above crucial resistance levels, and most of the IPOs which got listed last year are trading with healthy gains from their issue price.

14 mainboard companies with an issue size of more than Rs 100 crore, which listed on the bourses in 2020, are trading with a positive bias, and 13 of them are trading with double-digit returns, data from AceEquity highlighted.

As many as 4 out of 13 companies that gave double-digit returns have more than doubled investors’ wealth since listing from their respective issue price. Top companies which more than doubled investors’ wealth include Route Mobile, Burger King, Rossari Biotech, and Happiest Minds.

The other 9 companies rose 10-50% since listing. These include Angel Broking, Mindspace, SBI Cards and Gland Pharma.

The big question is – what should investors do with stocks that have more than doubled investors’ wealth since listing.

Experts are of the view that investors who are looking for short-term investments can book profits in stocks which more than doubles but there is tremendous growth potential. Long-term investors can stay invested.

“Route Mobile, Burger King, Rossari Biotech, and Happiest Minds have massive growth potential and expected re-rating in coming years, would like to suggest for long-term investors to stay invested in the companies,” Jitendra Upadhyay, Sr. Equity Research Analyst, Bonanza Portfolio told Moneycontrol.

“There is ample of scope available for the companies to enhance their businesses in India but short-term investors can book profits,” he said.

From a valuation perspective, most of the IPOs were offered at higher valuation but growth potential makes them an attractive buy even now or on dips, suggest experts.

Investors should continue to hold companies with the strong business models and growth prospects. “Route Mobile, Happiest Minds, Mrs. Bectors, and Rossari Biotech. The sectors in which these companies belong have a very good growth potential in the next 3-4 years,” Jay Thakkar - VP & Head of Equity Research at Marwadi Shares and Finance Ltd told Moneycontrol.

“IT and Telecom sector has seen a good re-rating since the outbreak of COVID-19 and FMCG and Pharma Sector too has reversed for the long term, especially the Pharma sector whose cycle has turned bullish after 5 long years,” he said.

Thakkar believe that the sector in which these companies belong to have started a structural bull market which will see good momentum for the next couple of years hence these stocks are also expected to perform quite well -- so based on these assumptions one can hold on to these stocks for the long term.

The outlook for 2021 looks robust, especially after the government cleared the air on bringing LIC IPO.

“There are few companies that are expected to come up with their IPOs in this year, a lot of investors are looking forward to LIC IPO. During surging market investors go more by sentiments than valuations,” Harshad Chetanwala, Co-Founder MyWealthGrowth.com told Moneycontrol.

“A lot depends on what kind of valuation are offered by these companies at the time of IPO. Just going by the times of oversubscription of IPO should be avoided,” he said.

Most of the IPO hit D-Street in the second half of 2020 with strong subscription rates. Many of them have given mouth-watering listing day gains which lured more retain investors to join the part in primary markets.

Data suggests that none of the mainboard IPOs have given negative returns. Many big-ticket names are expected to hit D-Street in 2021.

“Key IPOs expected in calendar 2021 include Kalyan Jewellers, Barbeque Nation, Bajaj Energy, Apeejay Surendra Park Hotels and LIC (could spillover to the next quarter),” Deepak Jasani, Head of Retail Research, HDFC Securities told Moneycontrol.

“Compared to Rs.26611 crore raised in calendar 2020, the amounts to be raised in 2021 could be higher especially if the LIC issues happen by end of 2021,” he said.