What’s on the table? Rossari listing performance to decide IPO mart fate

Out of the 10 issues, four have seen their share prices more than double from issue prices.

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The fact that only a handful of last year’s issues delivered robust gains yet again highlights the pricing issue, as many promoters pitched their IPOs at stretched valuations.
Mumbai: The listing of Rossari Biotech shares later this week will determine the pace of revival of the domestic IPO mart, which ended a four-month long hiatus since February with this issue last week.

Analysts say it will all depend on what the issuer has left on the table for investors. Reasonable pricing is going to be the key factor if one were to go by the lessons from last year in the light of the coronavirus disruption of the economy and markets.

Of the 17 issues that hit the market since the start of 2019, 10 have managed to deliver good returns since their listings despite the market volatility this year in the wake of Covid-19 disruption. Seven eroded value. Of these, four are down more than 25 per cent from their issue prices.


Out of the 10 issues, four have seen their share prices more than double from issue prices. They are Indian Railway Catering & Tourism Corporation (IRCTC), Neogen Chemicals, IndiaMart Intermesh and Affle (India).

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IRCTC has logged 328 per cent gains from last year’s issue price. However, the stock is currently down 31 per cent from its record high of Rs 1,995 hit in February, as the lockdown brought train travel to a grinding halt.

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Neogen Chemicals, which was listed in May 2019, is up nearly 143 per cent from its issue price. IndiaMart Intermesh and Affle (India) have risen 128 per cent and 111 per cent respectively from their issue prices.

The fact that only a handful of last year’s issues delivered robust gains yet again highlights the pricing issue, as many promoters pitched their IPOs at stretched valuations.

“IPOs that have fared well clearly show that their pricing was reasonable and promoters left enough on the table for investors. For example IRCTC, which turned out to be a multibagger,” said independent analyst Ambareesh Baliga.

He pointed out with SBI Cards, the pricing was fine, but the timing turned out to be bad, and unprecedented.

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SBI Cards & Payments IPO was the fourth-largest in the country. While the issue though sailed through the bidding process, it faced hiccups after listing as the pandemic and subsequent lockdown hit market sentiment. It currently trades at its issue price.

Then the market also saw nasty surprises such as Sterling & Wilson Solar, which currently trades 69 per cent below issue price, turning out to the biggest wealth-destroyers among recent IPOs.

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“Going ahead, promoters and bankers will have to be more careful about pricing. The current market rally is purely liquidity driven, which puts a question market on the fundamentals of the businesses for the near term. Even if an IPO sails, it will correct to its fair value post listing if not priced reasonably,” Baliga said.

The Rs 496 crore IPO of specialty chemicals manufacturer Rossari Biotech was subscribed more than 79 times last week. The issue is likely to be listed on July 23. Private sector lender YES Bank sold its follow-on public offer (FPO) last week, which was subscribed 95 per cent. Including the anchor book portion, the issue saw 95.14 per cent subscription.

Some 31 more companies are in queue to hit the primary market with necessary approvals from the Securities and Exchange Board of India. Together, they aim to raise around Rs 31,056 crore through the IPO route, data from primary market tracker Prime Database showed.

Market watchers say some of these companies might consider announcing IPOs after they see the success or failure of others.

“The situation is very different now. On one hand, I do not foresee too many issuances. For the issuances that will come, I do expect valuations to be reasonable given the overall bearish sentiment,” said Pranav Haldea, MD of Prime Database.

Others did not sound optimistic. “We are not willing to learn any lesson,” said Arun Kejriwal, director of Kejriwal Research and Investment Services. He was referring to last year’s expensively priced issues of Sterling & Wilson Solar, Chalet Hotels, Prince Pipes and Fittings and Spandana Sphoorty.

While Sterling eroded 69 per cent wealth, Chalet 54 per cent, Prince Pipes 40 per cent and Spandana 26 per cent.
“We don’t want to price anything at reasonable levels. While 4-5 issues can sail through, not all can pull it off. The way ahead for the market is reasonable pricing,” Kejriwal said.

“We don’t yet have dates lined up. Everybody is still testing waters. Covid or no Covid, promoters and bankers do not want to bring down prices, and that will be a hurdle in the market picking up,” he said.
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