Investors Swarm Into IPOs To Exploit Equity Market's Record Run
Historically, when the secondary market is doing well, there is a lot of activity in the primary market, both in terms of the number and volume of the IPOs.
The fear of missing out has hit Dalal Street as investors demanding shares of new companies are showing no signs of waning as the markets are scaling fresh highs every session. Eight mainboard initial public offerings have seen subscriptions of over 100 times so far as compared to four issues last year.
This year's demand was led by Vibhor Steel Tubes Ltd., which saw a subscription of almost 300 times, while the IPO of Plaza Wires Ltd. was the most bid last year with 160.98 times. During the month, four public issues saw their demand exceed 90 times.
The excess demand for these issues comes at a time when the world's fifth-largest stock market is touching a new high consecutively. The NSE Nifty 50 hit a fresh record for the 35th time this year on Wednesday, while the 1,000-point journey of the S&P BSE Sensex to cross the milestone of 78,000 was done in 11 sessions.
Historically, when the secondary market is doing well, there is a lot of activity in the primary market, both in terms of the number and volume of the IPOs. Most issues that get listed during such times do provide listing gains, which improve participation in future IPOs, according to Pranav Haldea, managing director of Prime Database Group.
A lot of retail investors only look at the IPOs from a listing point of view, and there are very few investors who are looking at the IPOs for the long run, Haldea said.
The BSE IPO—a gauge that tracks the performance of companies for two years after the offering—shows that recently listed companies have returned about 22% gains in 2024 against a gain of 40% gains in 2023.
The index surged to an all-time high of 15,353.83 on Wednesday, outperforming the Sensex, which has risen 9.5% this year.
Among the companies that debuted this year, Jyoti CNC Automation Ltd. saw the most rally, a surge of over 305%. Exicom Tele-Systems Ltd., Bharti Hexacom Ltd., TBO Tek Ltd. and JNK India Ltd. have rallied over 100% since their listing this year.
Seven out of the 33 mainboard companies that debuted this year were trading below their issue price.
Smaller-size issues drew the biggest demand as Vibhor Steel Tubes, SRM Contractors Ltd. and Kronox Lab Sciences Ltd. with an issue size of less than Rs 140 crore was subscribed over 100 times.
The year has seen 34 companies raise a total of over Rs 28,300 crore in comparison to Rs 49,437 crore with 58 mainboard issues in 2023.
Unless there are some negative surprises, the primary market should see a "record-breaking second half", Haldea said.
