Massive IPOs with worst debut day efficiency

Paytm shares closed 27% under the problem worth on the day of itemizing.

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

India’s greatest ever IPO closed 27% under the problem worth on the day of itemizing. This affected the sentiment in the complete 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 traders’ wealth on the day of itemizing. There have been many such IPOs up to now as effectively.

Let’s check out the mega IPOs with the worst efficiency on Debut Day. We’ve got thought of 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 utterly caught in a bear entice on the day of itemizing.

Paytm shares began their journey final week with a decline of 27.2% from its IPO worth 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 traders’ property value round Rs 40,000 crore on the primary day. Curiously, that is greater than the complete market cap of corporations like TVS Motors, Tata Communication, MRF and Oberoi Realty.

He’s not all the pieces.

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

Resulting from 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 traders.

Weak itemizing was on the playing cards as market specialists 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 almost 18% decrease at Rs 270 towards its difficulty worth of Rs 328.

Espresso Day Enterprises, which runs Cafe Espresso Day (CCD) shops, raised Rs 1,150 crore by its IPO. The difficulty was subscribed 1.64 occasions on the worth 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 worth was decrease than a personal placement just a few months again. He replied that he wished to go away among the cash on the desk for retail and institutional traders.

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 hardly ever traded above its difficulty worth.


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#3 Reliance Energy (-17.2%)

Massive IPOs don’t assure massive returns. We noticed this within the case of Paytm.

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

Resulting from heavy demand, the problem worth 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 traders.

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

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

This IPO was launched concurrently right this moment. Demat account was opening and folks put their cash to put money into IPO.

At a time when brokers satisfied and gave Reliance Energy’s IPO a thumbs up, Equitymaster was within the minority to offer a detrimental 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 worth of Rs 520. It closed with a decline of 14.4 per cent.

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

Put up 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 received a silent response.

The IPO failed to draw sufficient non-institutional and retail particular person traders. The difficulty was subscribed 1.14 occasions because of certified institutional traders.

The corporate made its debut with the inventory itemizing at a reduction of 12% to the problem worth of Rs 160 and ultimately 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 guardian 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 worth of Rs 554.

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

It acquired bids for shares at 2.31 occasions the provide.

The weak itemizing was on anticipated strains as a result of gradual response to the IPO and continued outflows within the mutual fund business at the moment.

#7 Kalyan Jewelers (-13.4%)

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

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

The market was not significantly passionate about this IPO as the corporate had a weak steadiness 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 its greatest IPO in two years. The IPO was subscribed 1.3 occasions.

Why is Equitymaster a contrarian on the subject of IPOs?

On the subject 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 Cause?

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

It isn’t like everybody sees IPOs. Most individuals are on the lookout for itemizing good points.

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