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Home / Markets / Stock Markets /  Will anchor investors desert as mega IPO lock-ins expire?

Newly listed companies Nykaa, Paytm, PolicyBazaar, and seven others may face heightened volatility starting Thursday as the 30-day lock-in for their anchor investors expires, allowing them to sell their holdings.

The 10 initial public offerings (IPOs) raised a combined 36,100 crore, with Paytm being the biggest such sale in the history of India’s primary market. Rules laid down by the Securities and Exchange Board of India (Sebi) mandate that shares allotted to anchor investors are locked in for 30 days from the date of allotment.

This comes at a time as investor sentiment appears rattled by factors such as the spread of the Omicron variant of SARS-CoV-2 and quicker-than-expected bond tapering possibilities by the US Federal Reserve. On Wednesday, the one-month lock-in period for the anchor investors of FSN Commerce Ventures, which operates Nykaa, will expire. Nykaa’s 5,350 crore IPO was subscribed 82 times, with about 21.3 million shares sold to anchor investors. The shares nearly doubled in their trading debut, listing at 2,018, a 79% premium over the issue price of 1,125, propelling its market value to more than 1 trillion.

Analysts said that selling pressure might grip these stocks as anchor investors will no longer be bound to remain invested in these companies. “December would test their staying power as those newly listed stocks’ lock-ins for anchor investors end," said Abhilash Pagaria, an analyst at Edelweiss Alternative Research.

Pagaria said selling pressure has been high near the anchor lock-in opening date in most stocks, where anchor allocation made up a significant portion of outstanding shares.

“In 2021, 51 stocks went public with 41 issuances’ anchor selling dates already behind. As many as 76% of those issuances have experienced selling pressure on the anchor lock-in opening dates," Pagaria added.

Anchor lock-in period for One97 Communication (Paytm) and PB Fintech (Policybazaar) will expire on 15 and 13 December respectively.

Paytm’s high-profile stock market debut was disappointing with the stock market debut wiping out more than double the money it raised through its IPO worth 18,300-crore.

Some analysts flagged concerns about Paytm’s listing day performance after its much-hyped IPO was subscribed just 1.89 times last week.

On its market debut, the stock’s 27% dive sliced 38,000 crore off Paytm’s IPO valuation, leaving investors facing heavy losses, at least on paper. At the top end of the IPO price band, Paytm was valued at 1.39 trillion.

Data showed, in most cases, selling pressure persists over the day after the anchor lock-in opening date. As much as 61% (25 out of 41) of the issues declined by 2.2% on the day after the anchor opening date. And after five days of the anchor opening date, 61% of issues traded 3.9% down. In most stocks where anchor allocation made up a larger mix of outstanding shares, selling pressure has been higher near the anchor lock-in opening date. There are four stocks where anchor investment is more than 10% among those in which the lock-in will expire in December. Those are Fino Payments (11.2%), SJS Enterprises (14.5%), Sapphire Foods (12.4%), and Go Fashion (12.2%).

Other newly listed stocks which will see anchor lock-in expiry this month are Sigachi Industries, Latent View Analytics and Tarson Products.

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