Lack of listing pop fails to hit demand for unlisted shares

  • Many IPO-bound cos are seeing a surge in share prices as investors seek to gain early access
  • In 2021, 38 companies raised more than 68,000 cr via IPOs, with most reporting good gains on debut

Ravindra N. Sonavane
First Published26 Aug 2021, 11:22 PM IST
Demand for unicorns such as Paytm is increasing in the pre-IPO market.
Demand for unicorns such as Paytm is increasing in the pre-IPO market.

Despite many companies failing to deliver positive listing-day returns in recent times, several initial public offering (IPO)-bound companies are seeing a surge in their share prices in the unlisted markets, as investors seek to gain early access to such companies.

For instance, shares of Paytm parent One97 Communications Ltd, which filed its draft papers with the Securities and Exchange Board of India on 15 July, have surged nearly 200% since 1 April, said analysts. The stock is trading at 2,920 apiece, up from 990 earlier.

Likewise, Sterlite Power Transmission’s shares in the unlisted market have jumped nearly 340% since 1 April from 330 to 1,450 a share. So far in 2021, it has advanced more than 1,200% from 110 a share. Sterlite Power filed its draft papers on 31 July.

Hot property

Fino PayTech, a profitable IPO- bound fintech company, has seen the value of its shares climb almost 88% from 215 to 405 a share sine 1 April. Year to date, the scrip has risen 230% from 120 per share.

Unlisted shares of National Stock Exchange, HDFC Securities, Tata Technologies, Studds Accessories and Tamilnad Mercantile Bank have also gained 50-120% since the beginning of the year.

Indian markets have witnessed a spectacular bull run in the pre-IPO space in sync with primary (IPO) and secondary markets.

“The last six to eight months have been no less than a wonder for pre-IPO investors as they minted truly unparalleled returns. The bull phase in listed markets and heavy oversubscription of IPOs led investors to tap the pre-IPO space,” an analyst tracking the unlisted market said, seeking anonymity.

“We have seen manifold jumps in share prices of Sterlite Power Transmission, One 97 Communications (Paytm) and Tamilnad Mercantile Bank, among others on account of their IPO plans, which were trading at very undervalued prices before the IPO buzz. As the market gears up for startup IPOs, demand for unicorns and tech startups is increasing in the pre-IPO market,” said Manan Doshi, co-founder, unlistedarena.com.

“We are noticing selling pressure in some stocks from all-time high levels with correction in primary markets. Many stocks are trading at expensive valuations where the probability of a healthy correction, which seems to be essential, cannot be denied,” he added.

Since the beginning of 2021, 38 companies have raised more than 68,000 crore via IPOs with most firms reporting healthy gains on debut.

However, the euphoria seems to be fizzling out amid concerns of expensive valuations with no meaningful fundamentals.

Recently, seven out of 10 listings have made huge losses for high net-worth investors.

Aptus Value Housing, Chemplast Sanmar, Nuvoco Vistas, CarTrade, Krsnaa Diagnostics and Windlas Biotech have delivered negative returns of 1-11% on listing days.

Exxaro Tiles and Glenmark Life Science opened marginally higher with just 3% and 10% gains, respectively, on debut.

“With the surge in share prices in unlisted markets, investors should take more precaution when they buy into these companies as the IPO price is not known while buying pre-IPO shares, and sometimes the IPO plans can get delayed,” warned JST Investment analyst Aditya Kondawar.

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First Published:26 Aug 2021, 11:22 PM IST
HomeMarketsIPOLack of listing pop fails to hit demand for unlisted shares

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