Don’t subscribe to an IPO just because it saw great interest from institutional investors — Indigo Paints, Mrs Bectors Food, and Ujjivan are examples to look at
- IPOs like Indigo Paints, Mrs Bectors Food, Chemcon Speciality Chemicals which got huge institutional demand during IPOs are down 14%-27% since listing.
- Some of the IPOs where institutional players subscribed for more than 100 times the shares on offer, are in deep red right now.
- Ujjivan Small Finance is one among such stocks, which is down 44% after more than a year of going public.
The Zomato IPO, for instance, saw institutional investors oversubscribing the issue by over 52 times. The shares of Zomato have gained over 6% since the listing. While one has to wait and watch if the stock lives up to the expectations, there are many other examples that show that the excitement of institutional investors does not assure good returns for retail investors who buy and hold shares.
Some of the recent superhit IPOs like Indigo Paints, Mrs Bectors Food, Chemcon Speciality Chemicals, Ujjivan Small Finance Bank received more than 110 times subscription from qualified institutional buyers (QIBs). Commercial banks, public financial institutions, mutual fund houses and foreign portfolio investors registered with India’s market regulator Securities and Exchange Board of India (SEBI) fall under this category.
AdvertisementThese stocks — where institutional players subscribed for more than 100 times the shares offered to them during the IPO, are in deep red right now — did see a bumper listing. However, not all of them have gone on to create wealth over a longer period of time.
Note: ‘x’ denotes the number of shares subscribed for, over and above the total offered
|Stock||Oversubscription by institutional investors||Change since listing||No of months since listing|
|Tatva Chintan Pharma Chem||185.23x||7%||Two days|
|Clean Science & Technology||156.37x||6.4%||11 days|
|G R Infraprojects||168.58x||-0.6%||11 days|
|Shyam Metalics||155.71x||15.23%||1 month|
|Nazara Technologies||103.77x||10.85%||4 months|
|Laxmi Organic Industries||175.43x||59%||4 months|
|MTAR Technologies||164.99x||33.86%||4.5 months|
|Indigo Paints||189.57x||-16.59%||6 months|
|Mrs Bectors Food||176.85x||-27.89%||7 months|
|Chemcon Speciality Chemicals||113.54x||-14.37%||10 months|
|Ujjivan Small Finance Bank||110.72x||-44.42%||19 months|
Among others, Indigo Paints’ IPO also made a strong listing on exchanges as the prospects of the paints industry looked good. And it is good for players like Asian Paints, whose stock has surged 71% in the last one year.
However, for Indigo paints the bummer came from the over $50 billion Aditya Birla Group, which announced its intent to enter the paint business soon after the IPO. Aditya Birla group’s flagship company Grasim has announced to foray into the paint business with capital infusion of ₹5,000 crore over three years.
It was the second wave of COVID-19 pandemic that dented the stock of Ujjivan Small Finance Bank, which listed at over 50% premium to the issue price. The shares of the company have slipped 44% since listing as investors feared that many of its borrowers may not be able to repay their loans.
AdvertisementA similar pain is visible in the bottomline of Bandhan Bank — which leads in lending to the microfinance segment — which shrank nearly a third in the April-June 2021 quarter.
The $73 million IPO of the biscuit and bakery products maker Mrs Bectors Food was a hit — subscribed over 198 times. It was the top IPO by subscription in 2020. After its listing on December 24, the stock had started declining. Analysts had said the stock was overpriced and even expected correction.
According to an Axis Securities’ IPO note released in December, the company holds mere 1% of the market share in the branded biscuit segment, whereas its other listed peer Britannia has about 28% share of the pie.
And as feared, the April-June quarter was bad even for Britannia, which saw its profit shrink by nearly 29% despite measures to curb costs.
Meanwhile, Laxmi Organics has gained 59% since its listing on March 25, 2021. The company is the largest manufacturer of ethyl acetate — used as a solvent in paints and perfumes, for instance — with over 30% market share in product category.
AdvertisementIn July, Tatva Chintan Pharma Chem, G R Infraprojects and Clean Science and Technology made a strong listing with over 100% premium. Let us see how these stocks turn out to be in the coming months.
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