This year, India’s IPO scene is all glitz and glam—just not for the giants you'd expect. While household names like Hyundai Motors and Ola Electric stumbled out of the gate, little-known firms rocketed to stardom, thrilling investors with eye-popping listing-day gains. Predominantly the mantra today is pure thrill-seeking—who’s got the biggest bang at the opening bell?
The numbers are wild: nearly 600 IPOs have hit the market since January 2023, with 335 just this year as of October 14. Among 110 SME IPOs in the first half of 2024, a whopping 87 ended up in the green, and 43 doubled investors’ money, according to PRIME Database data. Think about it—three out of four SME IPOs made investors richer, and 40% turned into multibaggers.
The catch? Some experts say this “small fry frenzy” might be bubbling over, with valuations in frothy territory. Contrast this with the big-league IPOs, where the story’s been more fizzle than sizzle.
Research from Capitalmind Financial Services shows that 24 of the 40 largest IPOs in the last decade couldn’t keep up with the CNX 500, with 12 even delivering negative returns. Why the flop? Well the IPO scene is a tale of thrill-seeking investors choosing speed over substance.
Instead of buying into rock-solid financials, they’re chasing the tantalizing promise of grey market premiums (GMPs), betting on lesser-known companies with average numbers in hopes of quick, explosive returns.
Established giants like Hyundai, with solid books and proven growth stories, are seeing lukewarm interest, as their slow-and-steady profiles don’t deliver the fireworks these traders crave.
This high-stakes hunger isn’t new—it's the same force driving the secondary market, where midcaps and smallcaps have outshined largecaps in recent years, offering faster paths to multiplied returns.
Now, that trend is fully spilling into the IPO market, as investors increasingly favor IPOs that promise a big bang on day one over safer, steady players. It’s a chalk-and-cheese choice: quick-hit profits with small upstarts versus the tried-and-true growth of large caps.
But it’s like a house of cards; when the wind of reality blows, it all tumbles down. SME IPOs, some with thin track records, are getting oversubscribed by retail investors driven by pure FOMO, chasing the high of listing gains and these signs of irrational exuberance are alarming.
“History shows that speculative excesses often end in tears,” said VK Vijayakumar from Geojit Financial Services who sees a fine line between opportunity and excess. The IPO craze is morphing into a textbook case of “too good to be true”.
Fueled by high liquidity and investor FOMO, these sizzling IPOs are barreling ahead—yet warnings are flashing red. Many of these stocks might quickly turn illiquid after the initial frenzy, some warn.
Investors, beware: when the music stops, some could be left stranded without a chair. Regulators may soon need to pour some cold water on the mania before retail investors find themselves trapped in a ruthless game of “greater fool.”
Nuvoco Vistas (Rs 331, -3.2%)
Reported a net loss in the quarter ended September
Bull Case: As the industry enters a busy season, a likely recovery in demand and cement prices bode well for Nuvoco's improved performance hereon. Revival in prices after the festive season, down-trending fuel costs and seasonal tailwinds should aid in margin recovery in 2HFY25E
Bear Case: Core markets in the northern/eastern regions witnessed price cuts, led by subdued demand due to extended monsoons and delayed capex spends. This lack of demand could continue. The company’s ‘value over volume’ strategy continues to lead to underperformance versus peers and market share loss, said Kotak Institutional Equities.
Colgate Palmolive Company (Rs 95.6, -4%)
Shares sink as margin miss in Q2 FY25 disappoints Street.
Bull Case: Advertising spending surged in Q2FY25, reflecting increased support for brand promotion and initiatives to drive category growth. Launch of science-based premium products to enhance realisations. Boosting consumption frequency and rural penetration to drive broader market reach. Expanding the personal care portfolio to reduce reliance on the slower-growing oral care category.
Bear Case: Margin was negatively impacted due to gross margin contraction and increased advertising expenditures. Increasing competitive intensity may affect company's long-term growth prospects. The recent sharp rise in stock price has capped its upside potential. Rising input costs.
(With inputs from Zoya and Neeshita)
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
