IPO buzz fizzling out: Despite the ongoing excitement surrounding initial public offerings (IPOs) as we approach year-end, there appears to be a sense of fatigue creeping into the IPO market recently. So far in November, Afcons Infrastructure Ltd (2.6x), Sagility India Ltd (3.2x), Swiggy Ltd (3.6x), ACME Solar Holdings Ltd (2.8x), and Niva Bupa Health Insurance Company Ltd (1.8x) have struggled to achieve full subscriptions during the bidding period, all settling at less than 4x. Further, the issues lately have also been experiencing lackluster listings.
Market analysts primarily link this fatigue to the prevailing weak sentiment in the overall markets, citing various domestic and global factors that have contributed to the market’s decline in the recent times.
Initially, issues were fully subscribed within hours of their launch or on the very first day, in contrast to the figures being observed for IPOs lately on the first day. The participation of retail and non-institutional investors too used to be very overwhelming in the success of the past issues until early October 2024.
Among the most successful IPOs prior to the onset of fatigue were Waaree Energies Ltd (76.3x), Diffusion Engineers Ltd (114.5x), KRN Heat Exchanger and Refrigeration Ltd (214.4x), Manba Finance Ltd (224.1x), and Gala Precision Engineering Ltd (201.4x).
Going forward investors are likely to focus on upcoming offerings including the Zinka Logistics Solution IPO, the NTPC Green Energy IPO, the Enviro Infra Engineers IPO, and the Avanse Financial Services IPO.
Here’s what market experts say
Arun Kejriwal, the founder of Kejriwal Research and Investment Services
Arun Kejriwal, pointed out that when we analyse the last five to ten IPOs, there has been a noticeable decline in subscription levels, as well as a decrease in the returns from IPOs, whether they are negative or only slightly positive. The reality is that the percentage returns have shrunk to their lowest point. Previously, we would see early subscription from retail investors leading to oversubscription right on the first day; now, that is not the case on day one, day two, or even day three, as they are not fully subscribed. This change is due to the fact that, earlier, getting allotment was rare, but now it is more common, and often, there is no good return on the investment. The grey market premiums that once thrived at 30%, 40%, or even 50% of the issue price are currently struggling at around 10%. Consequently, investors are becoming doubtful about whether the minimal potential gains justify making an investment or if they should stay away. All of these factors have contributed to a sense of fatigue within the IPO segment, leading to hesitation in applying for them.
Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities
On the other hand, Prashanth Tapse explained that primary market action depends on secondary market performance because the secondary market provides high liquidity to investors to participate in the primary market. Ongoing market turbulence is giving a feverish feeling to the primary market, which is witnessing the fever of lower than expected demand and subscriptions from almost all types of investors, followed by poor listing due to the downtrend scenario in the secondary market. The performance of the secondary market is impacting the primary market papers. There can be multiple factors fuelling this fatigue in the IPO market, like continued selling pressure from foreign institutional investors (FII’s) followed by disappointed Q2 earnings that surprised the markets.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
