Listing pops rise in FY21; 78% stocks gain on day 1
Eighteen of the 23 IPOs so far this financial year have seen first-day gains
Despite covid-induced disruptions hitting businesses, the primary markets witnessed strong activity in FY21, especially in the second half as equities made a resounding recovery.
Most investors were rewarded for bets on initial public offerings (IPOs); the number of stocks with first-day gains or listing pop on exchange debut was the highest in at least three years, according to Prime Database. Eighteen of the 23 IPOs so far this year saw first-day gains. That represents 78% of the total stock listings in FY21. In contrast, only 69.23% of the total 13 IPOs in FY20 and 53.3% of 15 IPOs in FY19 saw listing pops.
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Also, newly listed stocks following an IPO saw an average first-day return at 40.63% in FY21, rising more than six times in the past three years. In FY21, four listings gave more than 100% return on the first day of trade. Those stocks are Burger King India, which rose 130.67%, Happiest Minds Technologies (up 123.49%), Indigo Paints Ltd (up 109.31%) and Mrs Bectors Food Specialities (106.79%).
Abundant liquidity in the stock markets and widespread optimism among investors on an economic revival and better-than-expected corporate earnings led to the rush of primary markets activity in the second half of FY21, said experts. In the financial year, primary markets recouped after a three-month lull because of disruptions and volatility in the stock markets caused by the covid-19 outbreak.
“Typically, primary markets activityalways depends on secondary markets. There were no new IPO launches or stock market listings in the first quarter of FY21, so all of them bunched up in the second half of the fiscal, harnessing the liquidity and sentiment in the overall markets,” said Pranav Haldea, managing director, Prime Database group.
As a lot of investors view IPO listings as an immediate return- or profit-making vehicle, high listing gains in a strong secondary market is not surprising, he said.
“As market sentiments have revived after the covid-19 downturn, there are a lot of re-filings of DRHPs (draft red herring prospectus) now. As new retail investors have started to trade, there is enthusiasm among the segment subscribing to IPOs. Also, high net-worth investors’ participation in IPO subscription has also increased manifold. Higher subscriptions boost market confidence, leading to a big rush for the stock on the day of listing,” he said.
Some of the big-ticket public issues in FY21 were Computer Age Management Services Ltd or CAMS ( ₹2,244.33 crore), UTI Asset Management Co. Ltd ( ₹2,159.88 crore), and Gland Pharma ( ₹6,479.55 crore).
There was huge investor interest for seven IPOs that were subscribed more than 100 times. They include Mrs Bectors Food Specialities (198 times), Mazagon Dock (157 times), Burger King (156 times), Happiest Minds (151 times), Chemcon Speciality Chemicals (149 times) and Indigo Paints (117 times). The most subscribed issue of FY21 so far has been the ₹596-crore IPO of MTAR Technologies that closed on Friday, with a subscription of 200.79 times. Its retail subscription was 28.38 times, while the non-institutional investor portion was subscribed 650.79 times.
Hospitality, real estate, construction and diversified industrial products were the most active sectors in primary markets, according to an EY report.
Sandip K. Khetan, EY India financial accounting advisory services leader, said exuberance in the markets has resulted in several companies, including e-commerce and emerging technologies, to accelerate their IPO plans.
nasrin.s@livemint.com
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