Is the IPO market losing its sheen?

NEW DELHI: After a fabulous run, it seems investors are shying away from IPOs (Initial Public Offerings). Not only is there a fall in the subscription rate of recent IPOs, but the stocks are also debuting on the bourses at a discount and most of them so far are trading at a lower value than the issue price.

India’s fifth-largest cement-maker Nuvoco Vistas Corporation’ shares made a weak debut on Monday as it started off its first-day trade at a 17.37% discount to the issue price of Rs 570. The Rs 5,000-crore IPO of the company had seen a tepid response from investors as it was subscribed only 1.71 times.

Nuvoco’s performance was followed by CarTrade’s underwhelming listing. The multi-channel auto platform’s shares made a weak debut as the stock was listed with a 1.11% discount to the issue price of Rs 1,618 per share. The stock opened at Rs 1,600 on the BSE despite being oversubscribed by 20.29 times during August 9-11.

Similarly, shares of Windlas Biotech, Exxaro Tiles and Krsnaa Diagnostics have performed poorly with their value crashing 7-16% since listing. And if experts are to be believed, upcoming listings —Chemplast Sanmar (subscribed 2.17x.) and Aptus Value Housing Finance (subscribed 17.2x) may also receive dull responses from investors.

Experts attribute to multiple factors with the two most important are — correction in mid/small-cap stocks and cyclical downturn. Vinod Nair, Head Of Research at Geojit Financial Services, said “A lot depends on the performance of the secondary stock market for the subscription trend of IPOs. It impacts the demand & valuations of new company offerings and listing gains. The ongoing weak performance of the broad market due to heavy selling of Mid & Small-caps is affecting the primary market today.” Deepak Jasani, Head of Retail Research, HDFC Securities, said, “IPOs are seeing a downcycle in terms of oversubscription and listing gains. Like every other cycle, even the IPO cycle undergoes various stages.”