Glass half full? 2022 saw 4 multibagger IPOs, but average listing pop mild

Volatility on Dalal Street did not leave the Indian primary market untouched, but the performance of debutants of 2022 has been mostly positive.

For those who see the glass half full, majority of the issue has delivered positive returns on listing and are in the green since then, whereas for others, the returns were skewed with lower subscriptions.

The year 2022 was marked with geopolitical tensions, inflationary worries, interest rate hikes and fears of recession, which altogether soured the sentiments for financial markets.

Since the beginning of the year, till December 12, Indian domestic markets welcomed as many as 32 companies raising about Rs 50,305 crore via their initial stake sales, delivering an average listing pop of little more than 12%.

In this study, we are only considering the companies which have already made their debut at the bourses. Thus, the issue of Sula Vineyards, Abans Holdings, Landmark Cars, KFin Technologies and Elin Electronics are not considered.

The study also includes a follow-on public offering (FPO) of Patanjali Foods, formerly known as Ruchi Soya Industries, which mopped up Rs 4,300 crore from the investors.

Astha Jain, Senior Research Analyst, Hem Securities said that about three-fourth issues delivered a positive listing pop and roughly the same number of stocks are trading above the issue price post listing. This is decent performance.

"The gains have been skewed on the back of lower liquidity following the interest rate hikes, bifurcation of HNI category, lower financing for the HNIs have dented the market sentiments."

75% of the debutants or 24 out of 32 listed on a positive note, with as many as 14 companies gaining 10-55% on the debut. However, the remaining eight companies listed at mild discounts of up to 9%.

Electronics Mart and Dreamfolks Services were listed at a premium of more than 50%, followed by Harsha Engineers, DCX Systems and Hariom Pipes. LIC and Inox Green Energy Services were the biggest laggards on day one performance.

LIC was the biggest issue for the year 2022, which mopped about Rs 21,000 crore from the primary markets, whereas Hariom Pipes and Venus Pipes were the smallest among the issues, raising Rs 130 crore and Rs 165 crore, respectively.

Kranthi Bathini, Equity Strategist, Wealthmills Securities said that LIC was the biggest and much awaited issue of 2022 which disappointed the investors, turning them cautious over the primary markets.

The wealth erosion in the tech-based internet companies, which burnt the fingers of investors, taught the necessary lessons to the investors and curbed the frenzy for the listing candidates, he added.

Since listing, 25 out of 32 companies have delivered a positive return till December 19, with seven companies rising more than 50%, whereas the same numbers of companies delivered negative returns.

Adani Wilmar, Venus Pipes, Hariom Pipe and Veranda Learning have turned multibaggers, rising 106-177% since their respective listing, followed by Patanjali Foods, Prudent Corporate and Vedant Fashions which gained 50% or more.

First issue of 2022, AGS Transact Technologies, emerged as the worst performing IPO for the year 2022, dropping 60% since listing. Life Insurance Corporation of India is down by 27% from the issue price and ranks second in the worst IPOs.

Delhivery, Inox Green Energy Services, Keystone Realtors, Dharmaj Crop Guard and Uniparts India are the other companies which are down 1-18% from their respective issue prices.

The coming year might bring some stiff challenges for the Indian primary markets, analysts fear. The robust listing pops are likely to become Covid-19 legends in 2023, they said.

"The rising inflation rate is likely to pump out more liquidity from the markets which will impact the companies earnings and fund raising plans," Jain from Hem Securities said. "The investors might lose interest in the IPO market."

Bathini is cautiously optimistic on the primary markets for the year 2023 and sees valuations moderating from the peak levels. He said the companies need to be more realistic on this front, particularly the loss making companies.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)