By Rakesh Kolipaka
Decrease in IPO Subscriptions
The country's IPO market has witnessed a slowdown in subscription over the past two months due to weak market sentiment and disappointment from listing performances, Axis Capital said in a report. Mumbai (Maharashtra) [India], Nov 3 (ANI): The Indian IPO market has witnessed decline in subscription over the past two months due to weakness in the market sentiment as well as poor listing performance, states a report issued by Axis Capital. It notes that the investors are playing safe, indicating that their confidence is shifting toward newer entrants in the market. It said, "A mix of disappointing IPO listing and a sharp decline in market sentiments has resulted in reduction in IPO subscription in last 2 months. "According to the report, "in FY 2024, 54 IPOs have been listed. Out of these 38 are trading at a higher price than the IPO issue, and this points to some mixed performance."
It further said that the historical data from July 2020 to November 2024 can be viewed in a different light, out of the 252 IPOs, launched during this period 186 were listed above issue price, 10 at the issue price, and 67 below it.
However, IPOs that had failed to perform are now recovered, and as of November 29, 2024, are trading above their issue price.
So far, as of November 29, 185 of the IPOs are trading above their issue price, making it clear that many listings remain resilient despite recent market challenges.
However, the market capitalization of companies tracked in the IPO Monitor--which includes 237 companies listed between July 2020 and October 2024--has fallen by 2.71 per cent in November 2024. The total market cap had declined from ₹39.72 lakh crore in October to ₹38.68 lakh crore in November.
According to the report, from July 2020 through November 2024: of the 252 IPOs, 186 priced above their issue price; 10 of them priced at the issue price; 67 dropped to below the issue price originally; and 31 regained, ending up closing above issue price by November 29, 2024.
It reflects broader market issues that the trend shows and muted investor sentiment regarding valuations. It has restrained the zest of investors in new IPOs as investors have become particular on which way to place their money.
The underwhelming listings and subsequent corrections revealed that firms entering the market required strong fundamentals and a good sense of market timing.
Contrary to this, Bajaj Housing Finance Ltd (BHFL) IPO managed to raise the issue nearly 67 times. On the other hand, Hyundai Motor IPO received less response as it was subscribed 2.37 times only, and recently, NTPC Green IPO also received an underwhelming response as it listed 3.24 per cent above the price of the IPO. Though the long-term prospects of IPOs look quite promising for most, this recent slowdown serves to underpin the urgency of stabilizing market conditions toward regaining investor confidence.
Nevertheless, with better-performing listings and a rebound in market sentiment, the IPO landscape might perk up in the coming months. (ANI)
The following chart shows the share price performance of recently listed IPOs categorized under the basis of their oversubscription levels and current gain percentages. Summary follows:
1. Top Performers:
Emerald Tyre Manufacturers Ltd.: Has the highest gain with a current gain percentage of 488.52%.
Apex Ecotech Ltd.: Huge performance with a gain of 420.73%.
Ganesh Infraworld Ltd.: Current gain percentage of 326.16%.
2. Middle Performers:
Nisus Finance Services Co. Ltd.: Profited 177.55%.
Agarwal Toughened Glass India Ltd.: Relatively a small profit of 9.25%.
3. Weak Performers:
Abha Power and Steel Ltd.: Suffered loss of 16.66%.
Suraksha Diagnostic Ltd.: Small profit of 1.27%.
Property Share Investment Trust: Barely passing at 1.19%.
Emerald Tyre Manufacturers and Apex Ecotech were seen as good performers with excellent returns that show great interest of the investors and confidence in the market.
Companies like Abha Power and Steel Ltd. and Suraksha Diagnostic Ltd. did not see that light as they struggled post listing, thus showing that IPOs perform differently.
This shows how various the performances of IPOs can be and thus importance placed on a careful evaluation.
Conclusion:
IPO represents one of the critical marketplaces for raising capital on exit from private equity and in general for an investor entry point to participate in very early equity investment. These recent trends show the slowdown that mainly has resulted from rather weak market sentiments and pretty unimpressive listing performance.
While historical data indicates a majority of IPOs have stood strong, with 185 out of 252 trading above their issue price, issues have been faced by the market, such as a contraction in market capitalization, and cautious investor behaviour. High-profile IPOs, such as Bajaj Housing Finance Limited (BHFL), showed robust demand. Others, such as NTPC Green and Hyundai Motor, presented muted responses, which depict the growing selectivity on the part of investors.
This mixed performance underlines the importance of solid fundamentals, strategic market timing, and favourable market conditions in making IPO launches successful. Companies need to deliver value and maintain transparency to regain investor confidence and revitalize the IPO landscape, while broader market stabilization will also play a key role in reversing the current downturn.
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