IPO Heatmap: 47 of 98 listed stocks this year slip below issue price; two half in value

Of the 98 listed companies on the mainboard this year, 47 are currently trading below their initial public offering (IPO) prices. Leading the decline is Gem Aromatics, which has dropped more than 55%, followed by Glottis, VMS TMT, Arisinfra Solutions, BMW Ventures, Jaro Institute, and another 41 companies. While the number of IPOs remains steady, the performance after listing appears to be disappointing.

Considering the trend, a question that comes to mind is whether investors are purchasing shares based on the grey market and if they are observing high oversubscription figures.

Experts suggest that this indicates a clear softening trend in India's primary market sentiment. The significant post-listing drops, ranging from 20% to 55% in various instances, underscore a growing disconnect between the initial enthusiasm during offerings and the underlying fundamentals.

Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, believes that this trend reinforces an important market lesson for investors who takes reference from illegal grey marketing that oversubscription demand never guarantees investors.

According to Tapse, IPO oversubscription is increasingly proving to be a sentiment-driven indicator rather than a reliable predictor of post-listing performance. For investors, it is a timely alert that disciplined due-diligence, valuation assessment, and scrutiny of business quality matter far more than subscription figures or grey-market noise.

Mid-cap and small-cap stocks experience the heat

Experts recommend that alongside the trends in the grey market and subscription habits, merchant bankers and promoters should work together more effectively to lower prices and the initial asking prices. Furthermore, analysts observe that overall market activity appears to be mainly concentrated on large cap stocks, while mid cap and small cap stocks continue to encounter difficulties. Except some large cap offerings, although most visible activity is focused on the small cap and mid cap sectors.

Arun Kejriwal, the founder of Kejriwal Research and Investment Services, expressed the need for change to enable companies to overcome current challenges. He stated that both merchant bankers and promoters must actively work together to reduce pricing and the initial asking price, as they cannot keep pricing issues at such high levels. If they ignore this, they risk harming their long-term success.

Additionally, Kejriwal pointed out that, when examining the broader market, most activity appears to be concentrated in large cap stocks, while mid cap and small cap stocks continue to struggle. Aside from ICICI Prudential, which is set to hold a roadshow on Monday and boasts a market capitalization exceeding 1 lakh crore, most of what is observable falls within the small cap and mid cap segments.

Kejriwal further recommended that investors should steer clear of the grey market, emphasizing that it is time to detach from that practice. He advised that if one does not fully understand a company, there's no need to subscribe. Moreover, he noted that in 80% of cases, shares tend to be available at a lower price upon listing. Therefore, there’s no need to rush into investments. The times when gaining an allotment was crucial for making profits are now behind us.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.