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Last Updated : Dec 20, 2018 01:36 PM IST | Source:

Primary market review: Time for investors to exit worst IPOs of 2018?

Moneycontrol analysts suggest that most of these stocks had lofty valuations as they were listed at a time when the companies' performances were at a peak.

Anupa Kujur @AnupaSagarKujur
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The year is coming to an end and its time for investors to look back and assess their investments. The year 2018 saw a lot of action in the primary market, or initial public offerings (IPOs).

Of all the IPOs listed this year, five IPOs that performed the worst were — Apollo Micro Systems, ICICI SecuritiesIndostar Capital FinanceHindustan Aeronautics, and Bharat Dynamics. They gave a negative return in the range of 33 to 54 percent.

While most of these stocks were undersubscribed, Apollo Micro Systems was subscribed 248 times and Indostar Capital Finance was subscribed 6 times.

Moneycontrol analysts suggest that most of these stocks had lofty valuations as they were listed at a time when the companies' performances were at a peak. The IPOs, however, could not give good returns in the short term because their valuations were placed based on speculations of the company's performance in a long term.

"Unfortunately, these is called 'bull market tragedy' because they get priced by investment bankers at a very high premium and leave very little on the table for investors who invest in the IPO," Sanjiv Bhasin, Executive Vice President, Markets & Corporate Affairs at IIFL told Moneycontrol.

Considering that the market is seeing a lot of rotation, Bhasin said,
Hindustan Aeronautics and Bharat Dynamics will be under pressure. However, with a change of guard at ICICI, ICICI Securities may give a better performance in 2019.
 For investors, who have already invested in these five stocks, may have no other option but to stay put as this has been a year of 'Buy the Fear and Sell the Greed', Bhasin said.

Investors may be able to reap benefits only after the general elections 2019 as experts believe that stocks may start performing better after elections.

"We would say that they are really good places but you have to wait till Diwali 2019 and even beyond to make some money on these stocks," he added.

While the base strategy could be to exit these stocks after looking at aspects such as whether the valuations justify the earnings, investors who are planning to hold on to these stocks may have to wait for an extended period to get returns on these stocks, Moneycontrol analysts say.

This year has been dull for IPOs and the businesses have corrected very sharply, Bhasin added.

The Securities Exchange Board of India (SEBI) on December 18 voiced concern over the slow pace of primary issues, despite a good market condition, and asked investment bankers to do more "diligence" on the pricing front to get investors in.

While the market regulator claims to have given a go-ahead to IPOs worth over Rs 60,000 crore in 2018, many of them are yet to hit the Street. Till October-end, 24 companies had raised Rs 30,959 crore through IPOs but most of these were until the March quarter.

Last year was the best in terms of IPO fund-raising, as the IPO market jumped to an all-time record of Rs 67,147.4 crore in fresh fundraising by over 120 companies, according to data from Prime Database.
First Published on Dec 20, 2018 01:36 pm
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