Listing gains: 16 out of 21 IPOs so far in FY21 list at premium; will the bull run continue next year?

The IPO market in India has witnessed strong activity in the current fiscal, even as COVID-19 pandemic hurt the investor sentiment during the first half of the year. No company came up with a public issue of equity shares in the first three months of the current financial year 2020-21. But as the IPO market heated up, specialty chemicals manufacturer Rossari Biotech launched its IPO, which was subscribed 80 times, and its shares listed with 57% premium on issue price. It was followed by Mindspace REIT IPO, shares of which were listed with nearly 11 per cent gain. So far in FY21, a majority of IPOs have listed with gains.

5 out of 21 IPO shares have more than doubled since listing

According to Prime Database, 16 companies – out of 21 IPOs so far in FY21 – listed with premium on the debut day. Route Mobile shares are currently trading at nearly five times the issue price of Rs 350 apiece, at Rs 1,616.50. It is followed by Happiest Minds Technologies Ltd, which has rallied nearly 220 per cent from the offer price to date. Currently, its shares are trading at Rs 529 apiece, against the offer price of Rs 166.

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Likhitha Infrastructure Ltd shares have surged 163.38 per cent since listing. The stocks were trading at Rs 316.05 apiece on Wednesday. Rossari Biotech is the fourth company so far to deliver over 100 per cent return from its issue price. The stock has risen 134.62 per cent from the IPO price of Rs 425, to trade at Rs 997.15 per equity. While Burger King India has delivered 133.42 per cent returns so far since listing. The stocks were trading at Rs 140.05, against the IPO price of Rs 60 per share.

Binod Modi, Head of Strategy at Reliance Securities, told The Outlooker Online, that investors’ appetite for IPOs have been quite encouraging in recent period, mainly on account of improved prospects of economic recovery indicating sustained rebound in corporate earnings. IPOs of quality companies such as Gland Pharma, Burger King, CAMS, Route Mobile, etc., received a good response from institutional investors, given the strong earnings outlook with reasonable valuations.

3 out of 15 companies in 2020 saw over 100% listing premiums

Last year, out of 15 IPOs (from April-December 2020), five companies Chemcon Specialty (115%), Happiest Minds Technologies (111%), Route Mobile (102.28%), Burger King (92%), and Mrs Bectors Food Specialities (74%) were among top listing day gainers. Aditya Kondawar, Founder and COO, JST Investments, told The Outlooker Online that going by the number of DRHP filings and already approved DRHPs, it seems as if the IPO run may continue in FY21 too. Because when subscription figures and the listing premium are through the roof, both companies and investors would want to keep churning this mania.

6 out of 7 companies so far in 2021 listed with premium

So far this calendar year, only Indigo Paints shares were listed with over 100 per cent premium. Moreover, barring Indian Railways Finance Corporation (IRFC) issue, all the six IPOs so far have been listed with premiums on the first day. Binod Modi from Reliance Securities also added that as the outlook of Indian economy continues to look promising for next fiscal and equity class remains a preferred mode of investment for superior return, investors interest towards IPOs is likely to remain strong.

As long as the valuations are within a respectable range, reflecting the business prospects and financial standing of the company, Gopal Kavalireddi, Head of Research, FYERS, told The Outlooker Online that then an IPO would list well and also continue a good performance post listing. The current bull run in the primary market should continue in FY22 too. Manthan Mehta, Head Unlisted & Private Equity Rurash Financial Services Pvt Ltd, told The Outlooker Online, that the market is in a bull run and most of the listed companies are trading at higher valuation. The ample liquidity in the market will increase the flow of investments into emerging markets, especially India. “This makes us believe that this bull market will continue, with small hiccups in between,” Mehta said.

(The views and recommendations in this story are expressed by the respective experts of research and brokerage firm. The Outlooker Online does not bear any responsibility for their advice. Please consult your investment advisor before investing.)