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Rs 1 lakh crore worth of free-float to loom over markets in coming months

Pre-IPO shares will be released from their Sebi-mandated lock-in, said CNBC TV18’s Prashant Nair in Editors’ Roundtable

August 06, 2022 / 05:59 PM IST
Even if a portion of the freefloat comes into the market, the risk isn't negligible, said CNBC-TV18's Prashant Nair. (Photo by Pixabay/Pexels)

Even if a portion of the freefloat comes into the market, the risk isn't negligible, said CNBC-TV18's Prashant Nair. (Photo by Pixabay/Pexels)

There is a massive free float that can hit the market in the coming months, according to data presented at a CNBC-TV18’ Editors’ Roundtable on August 6.

Stocks worth Rs 1 lakh crore or Rs 1 trillion will be freed from the Securities and Exchange Board of India (Sebi) mandated lock-in period. Even if a portion of this is sold by the investors, the risk to the market isn’t negligible, said Prashant Nair, National News Editor.

He reiterated that, while the entire batch of the stocks may not come into the market, a percentage of it is likely to.

Also read: Zomato stock tanks 13% as lock-in ends

Shares of companies such as Paytm, Delhivery, PBFintech and Nykaa bought by private equity investors and venture capitalists before the IPOs have to be held by these investors for a period of time, according to a Sebi rule. This lock-in period used to be one year, but it has been reduced to six months. Between now and December 2022, several of these lock-ins will expire, pointed out Nair, which means that these shares can be traded.

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“This not to say that shares worth Rs 1 lakh crore will be traded but, even if a portion of this is traded, it can hit the market,” he said.

Nair presented percentages of shares of some of these companies–66.15 percent of Paytm worth Rs 34,300 crore;  39 percent of Delhivery worth Rs 17.529 crore; 54.94 percent of PB Fintech worth Rs 13,687 crore; 22.35 percent of Star Health worth Rs Rs 9,014 crore; 54.16 percent of Aptus Value Housing worth Rs 7,886 crore; 10.2 percent of Nykaa worth Rs 6,890 crore; and 6.3 percent of Sapphire Foods worth Rs 5.226 crore.

Several factors will determine how much of these shares will be sold, said Nair.

“One, the dynamics and motivation for every investor, whether VC or PE or public investor, will be different. Two, fund life has to be considered. Fund life is usually 10 years, plus an extension sometimes of two to three years. Several of these funds are set to expire. Three, global cues are important. Four, performance of the overall fund will also matter. If any fund, like Tiger Global, is doing badly in other parts of its portfolio then it will take money where it can,” said Nair. Tiger Global holds 7.1 percent in PB Fintech.

Sequoia Capital, which a few months ago said that the good times are over and the current environment will be a “crucible moment”, holds 13.88 percent in Go Fashion.

Also read: Softbank talent drain worsens adding pressure on Masayoshi Son

Softbank’s and Alibaba’s actions will be closely watched because they are big players, and Alibaba also because of India-China tensions and the regulatory risk involved. Softbank holds 10.16 percent in PB Fintech and 17.47 percent in Paytm; and Alibaba holds 31.1 percent in One97 Communication (Paytm parent).
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