Large IPOs with worst debut day efficiency

Paytm shares closed 27% beneath the problem value on the day of itemizing.

Had been you stunned by Paytm’s inventory market debut?

India’s largest ever IPO closed 27% beneath the problem value on the day of itemizing. This affected the sentiment in the whole inventory market.

Paytm’s flop present shouldn’t come as a shock to you as this isn’t the primary time {that a} high-profile IPO has eroded buyers’ wealth on the day of itemizing. There have been many such IPOs prior to now as properly.

Let’s check out the mega IPOs with the worst efficiency on Debut Day. We’ve got thought-about IPOs with a problem measurement of greater than Rs 1,000 crore.

#1 One97 Communications (-27.2%)

Shareholders of One97 Communications, operator of main digital funds platform Paytm, have been fully caught in a bear lure on the day of itemizing.

Paytm shares began their journey final week with a decline of 27.2% from its IPO value on Thursday. The shares hit a decrease circuit at round 3:00 pm and buying and selling within the inventory stopped.

The sell-off worn out buyers’ belongings value round Rs 40,000 crore on the primary day. Curiously, that is greater than the whole market cap of corporations like TVS Motors, Tata Communication, MRF and Oberoi Realty.

He’s not every little thing.

Paytm shares are once more caught in sell-off at the moment. They’re down greater than 12%.

On account of this heavy sell-off, the market regulator is now planning to inquire from funding banks dealing with Paytm’s IPO. The regulator will search their opinion on why the inventory declined on the day of itemizing.

It additionally plans to research whether or not any remarks made by firm officers or bankers may mislead buyers.

Weak itemizing was on the playing cards as market consultants have been already cautious about Paytm’s excessive valuations, muted investor response and loss-making enterprise. However such an enormous drop was sudden.

However regardless of the autumn, the corporate has a valuation of over Rs 1 lakh crore.

#2 Espresso Day Enterprises (-17.6%)

Shares of Espresso Day Enterprises closed practically 18% decrease at Rs 270 towards its problem value of Rs 328.

Espresso Day Enterprises, which runs Cafe Espresso Day (CCD) shops, raised Rs 1,150 crore by means of its IPO. The problem was subscribed 1.64 instances on the value band of Rs 316-328 per share.

In March 2015, the agency raised Rs 100 crore in pre-IPO funding from Nandan Nilekani and Uncommon Enterprises (promoted by Rakesh Jhunjhunwala).

In a press convention forward of its IPO, VG Siddhartha was requested why its providing value was decrease than a non-public placement a number of months again. He replied that he needed to go away a few of the cash on the desk for retail and institutional buyers.

In 2020, buying and selling within the shares of Espresso Day was suspended for non-compliance with the itemizing norms regarding the submission of quarterly monetary outcomes. Buying and selling in shares resumed from April 26 this yr.

Since itemizing, the corporate’s shares have been on a downtrend and have not often traded above its problem value.


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#3 Reliance Energy (-17.2%)

Large IPOs don’t assure huge returns. We noticed this within the case of Paytm.

However an analogous instance occurred in 2008 when Reliance Energy supplied an IPO of Rs 11,560 crore.

On account of heavy demand, the problem value for the Anil Ambani-owned Reliance Energy IPO was mounted at an higher band of Rs 450 for non-retailers and Rs 430 for retail buyers.

What’s extra, the problem offered out throughout the first minute of its opening on January 15, 2008. The IPO had obtained document bids of over 5 lakhs value Rs 7.5 lakh crore and the problem was subscribed greater than 72 instances.

The inventory made its debut on the exchanges on 11 February 2008. It rose to Rs 599 for a while however finally closed at Rs 372, down 17.2% from the problem value.

This IPO was launched similtaneously at the moment. Demat account was opening and other people put their cash to spend money on IPO.

At a time when brokers satisfied and gave Reliance Energy’s IPO a thumbs up, Equitymaster was within the minority to offer a damaging outlook on this IPO, and, boy, have been we proper!

When the market crashed, the inventory misplaced 70% of its worth in eight months!

#4 ICICI Securities (-14.4%)

ICICI Securities, which was India’s largest broking agency when it listed in 2018, opened a weak market at Rs 435, giving a reduction of 16.4 per cent to the problem value of Rs 520. It closed with a decline of 14.4 per cent.

The Rs 4,020 crore IPO didn’t enthuse buyers and bought a poor response as the problem bought solely 78% subscription on the final day of the bidding course of.

Submit subscription, the corporate diminished the dimensions of its IPO to Rs 3,500 crore.

#5 Cairn India (-14.1%)

Cairn India got here up with an IPO of Rs 8,620 crore between December 11 and December 15, 2006. It bought a silent response.

The IPO failed to draw sufficient non-institutional and retail particular person buyers. The problem was subscribed 1.14 instances due to certified institutional buyers.

The corporate made its debut with the inventory itemizing at a reduction of 12% to the problem value of Rs 160 and finally closed down 14% at Rs 137.50.

Cairn India shares have stopped buying and selling since 2017, when the oil producer merged with its debt-ridden dad or mum Vedanta.

#6 UTI AMC (-14%)

Final yr in October 2020, UTI Asset Administration Firm (AMC) made a weak begin on the exchanges, itemizing at a reduction of 14% towards the problem value of Rs 554.

The IPO, value Rs 2,160 crore, was offered between September 29 and October 1 within the value band of Rs 552-554.

It obtained bids for shares at 2.31 instances the provide.

The weak itemizing was on anticipated traces because of the gradual response to the IPO and continued outflows within the mutual fund trade at the moment.

#7 Kalyan Jewelers (-13.4%)

Kalyan Jewelers debuted within the inventory market in March this yr. The inventory bought listed on BSE at Rs 73.90, a reduction of 15.1% on its problem value of Rs 87. It decreased by 13.4%.

The Rs 1,180 crore problem was offered between March 16 and March 18, 2021 and was subscribed 2.61 instances.

The market was not significantly smitten by this IPO as the corporate had a weak stability sheet and poor capital allocation.

#8 Indus Towers (-13.1%)

Indus Towers (erstwhile Bharti Infratel), backed by billionaire Sunil Mittal, posted a 13% drop in its enterprise opening in 2012 after elevating round $760 million.

The corporate raised Rs 4,120 crore by means of its largest IPO in two years. The IPO was subscribed 1.3 instances.

Why is Equitymaster a contrarian with regards to IPOs?

In the case of IPOs, Equitymaster has not solely been a worth investor however has additionally been a stark distinction.

From Reliance Energy’s IPO in 2008 to SKS Microfinance IPO in 2010 to Espresso Day Enterprises and InterGlobe Aviation’s IPO, our views have been a part of a minority.

The Purpose?

We don’t deal with an IPO as a buyout of another inventory that buyers can think about for a long-term funding. So there isn’t any purpose for us to compromise on ditch, administration high quality and firm valuation.

It isn’t like everybody sees IPOs. Most individuals are searching for itemizing positive factors.

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