Small IPO investors paring exposure post-listing

Small IPO investors paring exposure post-listing


Mumbai: Initial public offers are selling like hot cakes despite the recent turbulence on the bourses, but have become more of a short-term opportunity with 60% of the issuers seeing a sell-off by a large number of small investors within days of listing.

An analysis of all IPOs in the past year shows that 43 companies saw a fall in the number of shares held by small individual shareholders. This is based on the pre-listing and the mandatory quarter-end shareholding data disclosed by issuers.

As many as 76 companies came out with IPOs since August last year and both pre-listing and quarter-end shareholding pattern is available for 71 of them.

According to market observers, short-term investors tend to sell their shares mostly on the first day — evident from the huge trading volumes recorded by the stocks on their first day on the bourses. One reason the smal guy sells on listing is that he isn’t sure the momentum generated by the IPO will continue, said a broker.

Brokerage firm Motilal Oswal Financial Services Ltd’s chairman and managing director Motilal Oswal told PTI: “It is true a number of investors have started behaving like passengers when investing in IPOs. They tend to put money in a public issue, book profit from the listing gains and then invest in another IPO," he said.

Incidentally, Motilal Oswal’s issue closed on 23 August with an over-subscription of more than 27 times.

According to data with stock exchanges, Development Credit Bank, Global Broadcast Network, Idea Cellular, Indian Bank, Lanco Infratech, Raj Television, Power Finance Corp, Sobha Developers and Tech Mahindra were among companies that saw a decline in their small individual shareholdings.

Besides, Info Edge India, which owns job portal, Hanung Toys, fashion goods firm House of Pearl, Mudra Lifestyle, Nissan Copper, AMD Metplast, Atlanta, Accel Frontline and Action Construction also recorded a decline.

Small retail investors are those who hold shares worth up to Rs1 lakh in a company.

Post-listing sales come amid an average 23% gain posted on debut trade, followed by an upward rally when investors who aren’t allotted any shares rush to buy them.

Based on the first-day gains recorded by each stock, an investor would have netted a gain of Rs3.8 lakh on a portfolio of 100 shares of all issuers in the past one year.

Most of the companies that saw a sell-off by small shareholders psoted huge first-day gains over their issue prices, while some of those who ended with a discount also recorded sale of shares by them.

Shares of Fiem Industries, House of Pearl, Raj TV and Gremach Infra closed below their issue prices in the debut trade, but small investors seem to have pared their exposure in the following days after booking some gains.

Vishal Retail is the only company that saw no change in the net holding of small shareholders, although the stock had recorded a gain of 178% in its debut trade.

A total 28 companies — including Akruti Nirman, Cairn India, FirstSource Solutions, GMR Infra, Mindtree Consultancy, Pyramid Saimira, Fortis Healthcare and ICRA — saw their base of small shareholders increasing after listing.